Nvidia fever, trumped by crypto cracks, sends stocks reeling

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Nvidia fever, trumped by crypto cracks, sends stocks reeling.

stock :: 2025-11-21 :: source - thestreet

By Todd Campbell

Photo by Spencer Platt on Getty Images

Nvidia is the poster child of the stock market's AI-driven ascent to record highs, so all eyes were laser-focused on its latest earnings report. The AI King delivered the goods, besting Wall Street analysts' top and bottom-line estimates, and offering bullish guidance.

Investors reacted kindly... at first.

Nvidia shares jumped 5% on optimism that the company's momentum would continue due to the sold-out Hopper and Blackwell AI chips, as well as growing networking revenue. However, optimism — in the end — was dashed as the day progressed and investors shifted to the sidelines, causing Nvidia to slip into the red and the tech-heavy Nasdaq Composite to slide over 2% on the day.

The reversal is concerning, given that the market had already been retreating in the lead-up to Nvidia's highly anticipated earnings call. Fingers pointed first at the arrival of an arguably mixed Bureau of Labor Statistics' September employment report, which the U.S. Government shutdown had delayed.

Annual S&P 500 returns since 2020:

2025: 12.5% (ytd)
2024: 23.3%
2023: 24.2%
2022: -19.44%
2021: 26.9%
2020: 16.3%
Source: MacroTrends.

The report showed better-than-expected job creation of 119,000 during September, reversing the losses in July and August. However, an increase in job seekers offset job growth, causing the unemployment rate to tick up to 4.4% from 4.3%, well above the 3.4% recorded in 2023 and the highest level since 2021.

The mixed messages from the jobs report arguably made the likelihood of a Fed rate cut in December murkier, but the CME FedWatch tool still saw a boost in odds of a cut on Dec. 10 to 39% from 30% before the jobs data.

That should've been good news for stocks. A dip in the 10-year Treasury yield, which retreated to 4.09% after the jobs data, should also have helped stocks.

So, why did the S&P 500, Nasdaq, and Nvidia reverse and finish lower? The answer may be Bitcoin.

Nvidia shows AI demand remains robust

Nvidia clearly delivered a strong quarter, with revenue of $57 billion (up 62% from one year ago) and earnings per share of $1.30 (up 67% YoY), surpassing analysts' expectations and predictions for about $55 billion and $1.26, respectively.

Nvidia's CEO struck an unsurprisingly positive tone during the company's conference call, reminding analysts that its chips were fully utilized and production had sold out, with half a trillion dollars' worth of demand recorded this year and next.

The company somewhat dismissed the concern that its customers were depreciating its GPUs over too long a period by stating that Hopper chips, its prior generation of GPUs for AI, were still highly utilized and in demand.

Huang and his CFO, Colette Kress, also discussed expanding demand for its networking equipment, especially designed to connect all those racks of Nvidia-powered servers to form ever-larger and more power-hungry data centers.

Overall, there was little to dislike in the numbers, but that's become expected — problematic, given that stocks tend to perform best when they're defying expectations, rather than merely meeting them.

Jobs data sends economists in circles

The big cut-or-no-cut debate has been raging since the Federal Reserve lowered its Fed Funds Rate by a second consecutive quarter-percentage-point in October. Fed heads have been on the media circuit questioning the need for more cuts this year, given inflation has rebounded in the wake of President Donald Trump's tariffs.

September's jobs data gave a little boost to both hawks and doves regarding the upcoming move in December. Wall Street expected just 50,000 jobs to be added in September, far less than the BLS's data suggests. However, the unemployment rate carries more weight with the Fed, and that increase to 4.4% will loom large at the next FOMC meeting — particularly given alternative job data from private companies, which paints a bleak picture for October.

ADP reported jobs growth in October, but the 42,000 jobs added paled in comparison to the 100,000-plus jobs regularly created monthly earlier this year and in 2024. Bank of America's data crunching of its customers suggests a 10% year-over-year increase in customers receiving unemployment checks, plus shrinking pay raises that aren't keeping pace with inflation. Meanwhile, Challenger, Gray, and Christmas report that US employers laid off 153,074 people in October, representing a 175% increase from the same month a year ago.

Clearly, there are cracks in the jobs market, and a growing possibility that the Fed is falling behind the curve in fixing them with lower interest rates.

Crypto crash may be triggering flight to cash

The slow drip of profit-taking has been quietly causing stocks to dip since record highs were reached in late October. The Nasdaq Composite has retreated 7.8% since its peak on Oct. 29.

Profit-taking plays a role, given the dramatic run-up since spring. Since the early April lows, when President Trump paused most reciprocal tariffs to create wiggle room for trade deals, the Nvidia-heavy Nasdaq had rallied 57% through Oct. 29.

More Wall Street:

However, a bigger selloff has been underway in crypto, with Bitcoin tumbling sharply from a peak in early October of $125,000 to about $90,000 — until today, when it undercut $90,000, falling over 5%, more than twice the Nasdaq's drop.

Time will tell, but the selling in Bitcoin may suggest liquidation — whether forced or not. We have certainly seen crypto leverage surge this year, reaching a record high.

"All told, crypto-collateralized lending expanded by $20.46 billion (+38.5%) in Q3 2025 to a new all-time high of $73.59 billion. This clears the previous all-time high of $69.37 billion at the end of Q4 2021 by $4.22 billion (6.09%)," according to Galaxy Research.

Wall Street analyst Tom Lee and Interactive Brokers' Steve Sosnick think that crypto's sell-off could have been the trigger that reversed early gains, prompting an exit in other risk assets, including stocks.

"Bitcoin is starting here to flirt with $90K; if it breaks, I have a feeling that the S&Ps can follow. And it was uncanny; as soon as we broke $90K, down went the Nasdaq and the S&P 500," said Sosnick in a CNBC interview.

"A lot of the crypto complex carries a lot more leverage than stocks. Stocks you can't lever up the same way you can do in crypto," continued Sosnick. "If that starts to break, it adds a lot more fragility to the system."

Tom Lee agreed, drawing parallels to early October, when Bitcoin fell 7.2% on Oct. 10 as a reportedly $19 billion of leveraged crypto was unwound.

"I think the crypto market has been limping along since October 10 because on that date was a negative shock. I mean, today's stock market looks a lot like an echo of what happened on October 10," said Lee on CNBC. "I think crypto, bitcoin, and Ethereum are in some ways a leading indicator for equities because of that unwind."

The break of $90,000 may have triggered, at a minimum, speculators to raise cash elsewhere, contributing to booking long-running profits in AI plays, including Nvidia.

This story was originally reported by TheStreet

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