Nvidia Hits $5 Trillion as Fed Pauses: Can Tech Carry the Market Higher?

Share the knowledge

Morning Market Snapshot – Thursday, October 30, 2025

U.S. equity markets closed with a mixed tone overnight as investors balanced excitement over technology sector momentum with renewed caution from the Federal Reserve. The S&P 500 finished essentially flat, edging up about 0.05%, while the Nasdaq Composite outperformed with a +0.55% gain. The Dow Jones Industrial Average lagged slightly, down 0.16%.

Bond yields remain a focal point. The 10-year U.S. Treasury yield hovered near 4.07%, signaling that traders are reassessing how much easing to expect from the Fed over the coming months

The tension between surging artificial intelligence optimism and cautious central-bank guidance defined the overnight tone. Tech remains the anchor of optimism, but investors are aware that higher yields and a restrained Fed can quickly dampen enthusiasm.

Pre-Market News Catalysts

Alphabet (GOOGL): Shares are surging approximately 7.7% in pre-market trading. The company reported stellar third-quarter results after the bell on Wednesday. It surpassed $100 billion in quarterly revenue for the first time, reporting $102.3 billion. Its closely watched Google Cloud division also beat estimates with $15.16 billion in revenue, validating its AI and enterprise strategy.
Meta Platforms (META): The stock is slumping, down about 8.5%. The company’s earnings report was complex. While it beat revenue expectations with $51.24 billion, its earnings per share came in at $1.05, dramatically missing the $6.70 consensus. The miss was attributed to a massive $15.93 billion one-time, non-cash income tax charge. Meta also raised its full-year expense and capital expenditure forecasts, signaling its “lavish spending” on AI will continue.
Microsoft (MSFT): Shares are trading lower by 2% to 4%. The software giant actually beat analyst expectations on both revenue ($77.7B) and EPS ($3.72), driven by a strong 40% growth in its Azure cloud business. The negative reaction stems from results failing to meet the “lofty expectations” of a market priced for perfection. The company also disclosed that its significant investment in OpenAI trimmed quarterly earnings by $3.1 billion.
Nvidia (NVDA): The stock is down 0.6% pre-market, pulling back slightly after it surpassed a $5 trillion market valuation on Wednesday. The mild pressure follows comments from President Trump that he had not discussed approving sales of Nvidia’s powerful Blackwell AI chips to China during his meeting with Xi Jinping. This dampened speculation that a new export allowance was part of the trade truce.

The Day’s Debate: The Bull vs. Bear Case

The Bull Case: Optimists argue that the market’s foundation remains solid. The primary argument is that underlying earnings growth is robust. One analyst noted that if overall S&P 500 earnings growth for this quarter finishes around 12% to 13%, with expectations for next quarter also rising, that fundamental strength “helps sustain markets”.

Alphabet’s report is a cornerstone of this view, with its 14.5% growth in Search proving the core digital advertising business is healthy. Furthermore, bulls see the massive AI spending as justified investment, not a cost. Microsoft’s CFO Amy Hood confirmed this by stating the company’s aggressive capex is “to meet demand that was already booked” and that Microsoft is still “likely to be short of capacity”. Finally, the formal US-China trade truce removes a significant source of global uncertainty, which should bolster business confidence and investment.

The Bear Case: Pessimists are focused on valuation and policy constraints. The main headwind is the Federal Reserve. Chair Powell’s warning that a December cut is “far from” guaranteed has reset interest rate expectations, strengthened the dollar, and created a “risk-off sentiment” that could choke the rally. Second, bears see the splintering of tech earnings as a major warning sign.

The market is no longer rewarding all AI players equally. Instead, it is questioning the “lavish spending” and “heavy spending” on AI infrastructure. Microsoft’s $3.1 billion earnings drag from its OpenAI investment and Meta’s rising capex guidance are seen as evidence of a potential spending bubble where costs are ballooning faster than profits. Finally, the ongoing government shutdown has left investors “flying blind”. Without critical data like GDP, it is impossible to accurately price assets or predict the Fed’s next move.

Deep Dive: The Crosscurrents Driving the Tape

Tech Leadership Dominates but Concentrates Risk
Nvidia’s historic valuation achievement has energized the AI trade once again. Traders are rotating into semiconductors, cloud infrastructure and automation plays. However, this rally is highly concentrated, the top five tech names now account for an outsized share of total S&P 500 market capitalization. If leadership fails to broaden, volatility could spike when momentum cools.

Fed Caution Resets Rate Expectations
While the Fed’s recent cut offered short-term relief, Powell’s language signaled a “wait-and-see” stance on further easing. Markets had priced in a faster glide path for rate cuts; that optimism is now being adjusted. This recalibration has sent yields slightly higher and pressured rate-sensitive equities.

Bonds Sending Mixed Messages
At 4.07%, the 10-year yield is not alarmingly high, but the direction matters. Rising yields can tighten financial conditions even without policy changes. If yields break toward 4.2% or higher, equities could lose their valuation support. Conversely, a drift back below 4% would likely reignite risk appetite.

Breadth & Rotation Under Watch
Sector rotation remains narrow, with defensive sectors lagging. Energy stocks were little changed, and financials traded mostly sideways. This lack of participation leaves the rally vulnerable. Bulls want to see improved leadership from cyclical and small-cap names before calling the next leg higher sustainable.

The Strategic Takeaway

The overnight session was a lesson in contrasts. The Fed is easing but cautious; tech is thriving but narrow. The single most important thing for investors now is to watch whether strong corporate earnings can offset the drag from rising yields and shifting Fed expectations. Momentum remains on the side of large-cap growth, but conviction is thinning at the margins.

Upcoming Session Outlook

Futures indicate a slightly bullish open. Nasdaq-linked names should continue to outperform early in the session, though traders will be sensitive to yield movements and any further Fed commentary. The base case: a mild grind higher with limited conviction unless fresh catalysts emerge.

Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or legal advice. The information provided is a synthesis of publicly available data and expert analysis and should not be considered a recommendation to buy or sell any security. Investing in the stock market involves risk, including the possible loss of principal. Past performance is not indicative of future results. Readers should consult with a qualified financial advisor to determine an investment strategy that is suitable for their own personal financial situation and risk tolerance.

Sources

Share the knowledge