Nvidia sold off 7% after hours on Wednesday night. By Thursday morning the stock was up 7% in premarket. By the close it had carried the Nasdaq more than 1% higher. The overnight reversal was one of the most dramatic in recent memory — and it tells you the after-hours selloff was a liquidity-driven overreaction, not a fundamental reassessment. Revenue up 122%. Margins at 75%. Guidance above consensus. Jensen Huang saying his only regret is he "didn't invest more and sooner." Salesforce surged 13% on better-than-expected guidance. CrowdStrike rallied. The software services ETF hit an all-time high. Tech gained 1.9% — the best sector by a mile. But six of eleven sectors closed red: Hormel dropped 9% on a guidance cut and Wendy's tumbled 12% after Trian stepped back from a buyout. And from Jackson Hole, Hammack repeated her call for higher rates while Schmid called inflation "stubborn and sticky." Warsh speaks tomorrow. The AI story just got louder. The inflation story hasn't gone quiet.
Tech-led rally, narrow breadth. The S&P rose roughly 0.5% to about 7,714. The Nasdaq gained about 1.0% to approximately 26,390. The Dow slipped 0.1% as consumer and food stocks dragged. Tech was the dominant sector at plus 1.9% — the widest margin of outperformance in weeks. Industrials gained 0.4%. Six of eleven sectors finished red. The rally was Nvidia-plus-software, not broad-based.
| The Numbers I Circled | At the close, August 27 · Day change |
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| S&P 500 | 7,714 | +0.5% |
| Nasdaq | 26,390 | +1.0% |
| Dow | 53,414 | −0.1% |
| S&P 500 Sectors | Day change |
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| Info. Technology | | +1.9% |
| Industrials | | +0.4% |
| Real Estate | | +0.1% |
| Utilities | | +0.1% |
| Energy | | 0.0% |
| Financials | | −0.2% |
| Consumer Disc. | | −0.2% |
| Materials | | −0.3% |
| Comm. Services | | −0.4% |
| Health Care | | −0.4% |
| Consumer Staples | | −0.6% |
| | Notable Gainers | Day change |
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Nvidia's reversal was the session's defining move. After falling 7% in after-hours trading Wednesday night — the fifth consecutive post-earnings decline — the stock reversed premarket and opened sharply higher. Revenue growth of 122% year over year, gross margins near 75%, and next-quarter guidance above Wall Street's $102-103 billion estimate looked different in the light of morning than they did in the thin liquidity of after-hours trading. Huang's comment on the earnings call — "the only regret I have is that I didn't invest more and sooner" — captured the thesis: AI spending is not decelerating. It's accelerating. And the largest company in the world just told you it wishes it had spent more.
Salesforce added fuel. The cloud software giant surged 13% after reporting better-than-expected guidance Wednesday night. CrowdStrike rallied. SailPoint and Palo Alto Networks gained. The State Street SPDR S&P Software & Services ETF hit an all-time closing high — its fifth consecutive weekly gain. The AI story is broadening: it's no longer just about Nvidia's chips. It's about the software layer that monetizes them. When Salesforce's AI guidance beats, it tells you enterprise customers are spending on AI applications, not just AI hardware. That's the second derivative of the AI trade — and it's accelerating.
The consumer side was the mirror image. Hormel Foods dropped 9.1% after missing revenue estimates and cutting its full-year sales outlook. Wendy's tumbled 12.4% after Reuters reported that Trian Fund Management stepped back from a potential buyout. HP fell 7.1% on declining PC and printer shipments. Consumer staples was the worst sector at minus 0.6%. The same split that defined the past two weeks — AI surging, consumer weakening — got sharper on Thursday.
From Jackson Hole, two Fed speakers reinforced the hawkish message. Cleveland Fed President Beth Hammack repeated her call for higher interest rates — she was one of the three July dissenters. Kansas City Fed President Jeffrey Schmid said inflation is "still stubborn and it's still sticky." Neither called for an immediate hike. But neither said the Fed was comfortable with the status quo. The FedWatch tool placed roughly two-in-three odds on a hold at the September meeting and one-in-three on a hike. The market is pricing Warsh's Friday speech as the deciding factor.
What The Market Is Pricing In
When a stock falls 7% after hours and rallies 7% the next morning, the market is telling you two things. First: the after-hours move was wrong. After-hours volume is thin, liquidity is poor, and algorithmic selling can push prices far below where institutions would buy. The regular session — with full depth of book, full institutional participation, and time to read the actual report — overrode the knee-jerk. Second: the fundamentals haven't changed. Revenue up 122% at 75% margins with guidance above consensus is not a company in trouble. The market sold first and thought second. When it thought, it bought.
But the buying was narrow. Tech gained 1.9%. Six of eleven sectors closed red. The Nvidia reversal didn't lift the market — it lifted tech. And that distinction matters heading into Warsh's Friday speech. If Warsh signals comfort with current yields and no urgency to hike, the narrow tech rally can broaden into the rest of the market as yield pressure eases. If Warsh echoes Hammack and Schmid — inflation is sticky, hikes are on the table — the tech rally stays isolated and the broader market continues to struggle under the weight of yields, oil, and a weakening consumer.
Software stocks hit an all-time high and Nvidia reversed its after-hours selloff, but six of eleven sectors closed red, and the market is telling you the AI trade can carry itself but it can't carry the economy — because Hormel cutting guidance, Wendy's losing its buyer, and HP reporting declining shipments are the consumer economy, and that economy is still weakening even as Nvidia reports 122% growth and Salesforce raises guidance. The question Warsh answers tomorrow is whether the Fed sees this divergence as sustainable — an economy where AI investment carries the growth while the consumer adjusts — or as dangerous, a split that eventually resolves when the weak side pulls the strong side down. If Warsh views AI spending as inflationary (it is — all that data center construction drives demand for power, land, and copper), he may lean toward tightening. If he views it as productivity-enhancing (it is — AI tools are making businesses more efficient), he may lean toward patience. The speech determines the framework for September.
Nvidia's own history is the template. The stock has fallen after five straight earnings reports and recovered from each decline within weeks. The fundamental story — 122% revenue growth, expanding margins, accelerating demand — is intact. The valuation story — is the stock cheap enough to buy — is what changes with yields. Lower yields make Nvidia worth more. Higher yields make it worth less. Warsh controls that variable tomorrow. Nvidia just delivered the numbers. Now the Fed delivers the context.
Three things I'm watching tomorrow:
01 — Fed Chair Warsh's Jackson Hole keynote Friday
The most important Fed speech of the year. Warsh's first Jackson Hole address sets the framework for the September meeting and beyond. Will he emphasize the 2% inflation target, which would imply patience and eventual easing? Or will he echo Hammack and Schmid's view that inflation is "sticky" and rates may need to rise? The bond market, the tech trade, and the consumer outlook all hinge on the tone. A dovish Warsh gives the S&P a path back to 7,800. A hawkish Warsh puts the 30-year yield back above its 19-year high.
02 — Marvell Technology earnings Thursday after the close
The second AI chip bellwether. Marvell's custom silicon business tells you whether the AI demand that Nvidia confirmed is broad-based across the chip ecosystem or concentrated in Nvidia alone. A beat confirms the AI trade is a sector story, not a single-stock story. A miss raises the question of whether Nvidia is the only AI winner.
03 — Does the tech rally broaden or stay narrow?
Thursday's rally was tech-only: 1.9% for the sector, six of eleven sectors red. If Friday's session — after Warsh speaks — extends the gains into financials, industrials, and consumer stocks, the two-week pullback is over. If it stays narrow, the market is telling you AI alone can't carry the S&P back to 7,800 without help from the rest of the economy.
Software hit an all-time high. Nvidia reversed. Salesforce surged. The AI trade answered the question the market spent two weeks asking. Now Warsh answers the one the AI trade can't: what does the Fed do about an economy where the strongest sector is the most inflationary, and the weakest sector is the one that keeps 70% of GDP alive?
That's it for today. See you tomorrow after the close.
— Tom Hartley
Today In Perspective · Published daily, Monday–Friday, after the close
This newsletter is for informational purposes only and does not constitute investment advice. The author is not a registered investment advisor. Past performance does not guarantee future results. Consult a qualified financial professional before making investment decisions.
