Global investors weigh long- and short-term wins amid Nvidia volatility

Global investors are bracing for a battle between long- and short-term gains amid a dramatic selloff in AI-related stocks.

AI my darling Nvidia It buoyed an otherwise dull market by reporting strong earnings after the bell on Wednesday, sending its own shares soaring and carrying relevant names with them. However, the rally quickly reversed on Thursday, with Nvidia ultimately ending the trading session down 3%.

While the US chip maker’s earnings initially appeared strong enough to quell concerns about an AI bubble, economic speculation has put global investors back on the defensive as hopes for a Fed rate cut in December faded. The UK’s highly anticipated Autumn Budget is also expected to be announced next week.

Asia-Pacific markets fell more than 10% on Friday, led by tech giant SoftBank. European stock markets followed the same path with a negative opening. However, as futures rise in the US, appetite may have reversed again.

“I think the market is quite confused about why this is happening,” Ozan Özkural, founding managing partner of Tanto Capital Partners, told CNBC’s “Squawk Box Europe” on Friday. he said.

This year’s market movements are driven by sentiment, momentum, artificial intelligence and innovation, he said, with “geopolitical risk fallout.” “While we don’t have a specific reason why there’s been a selloff following strong Nvidia results, to me it’s not that surprising because [it’s] “It’s only a matter of time before sentiment changes because we live in a much more uncertain world.”

He also added that there doesn’t need to be a catalyst. However, Özkural warned that “the most dangerous place we can be” is a continuous, albeit slow, sales wave, noting that portfolio managers may lock in earnings and lead to cash outflow.

He said asset managers are driven by compensation cycles and therefore don’t like to hedge their bets. “No one cares about the long term. In the long term, everyone is dead. Nobody even cares about the medium term. It’s all about short-term cycles,” he said.

“But the reality is it’s the end of the year, people need to get their bonuses and there’s no point in being bearish unless we see a sustained level of sales.”

Investors with cash in an AI ETF or index may be withdrawing cash due to a mix of year-end risk management and ongoing concerns about the AI ​​bubble. Stephen Yiu, chief investment officer of the Blue Whale Growth Fund, who works at Nvidia, said those who make a lot of money trading in artificial intelligence will probably want to step back and sell.