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Investing.com -- Wall Street woke up in an exuberant mood on Thursday following blowout results and guidance from AI darling NVIDIA Corporation (NASDAQ:NVDA). However, smiles turned to frowns by noon as today’s strong jobs report raised concerns that a December rate cut won’t materialize, and bears questioned the sustainability of NVIDIA’s strong results.
Before the market opened, the U.S. released the delayed September nonfarm payroll report showing a gain of 119,000 jobs, far outpacing the 50,000 expected by economists. Stocks started drifting off as analysts started weighing in on the numbers and what they could mean ahead of the December 10th FOMC meeting. Catching the biggest headline was word from Morgan Stanley that it no longer expects a December rate cut.
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“The sharp and broad rebound in payrolls (+119k) suggests the summertime slowdown might have been exaggerated… We no longer expect the Fed to lower the fed funds rate in December,” Morgan Stanley said in an intra-day note to clients.
In addition to lowered expectations of a December cut, bears started pointing to holes in NVIDIA’s AI growth story, including rising accounts receivable and inventory, and worries about circular deals with OpenAI and others.
NVIDIA’s accounts receivables in the quarter grew to $33.391 billion from $23.065 billion. Also pointed out by bears was that for the quarter, four direct customers had sales greater than 10% of total revenue. Customer A at 22%, Customer B at 15%, Customer C at 13%, and Customer D at 11%.
Short seller Mike Burry, known for his ‘Big Short’ fame, called the circular deals “fraud,” not a flywheel.” “True end demand is ridiculously small. Almost all customers are funded by their dealers,” he added. Burry also prompted users to find OpenAI’s auditor. “One more. OpenAI is the linchpin here. Can anyone name their auditor?,” Burry tweeted. FT.com said sources indicate that Deloitte is OpenAI’s U.S. auditor.
After trading up by more than 5% earlier following the results, NVIDIA closed down by more than 3%. The daily swing in market value amounted to an insane $392 billion.
Commenting on today’s sharp reversal in NVIDIA shares, desk analysts at Goldman Sachs said: "The NVDA print and commentary was positive any way you slice it. Really good news not being rewarded is typically a bad sign." Goldman also pointed to the current blowout in Oracle CDS prices, which have tripled as the database giant "becomes a barometer for AI risk and draws skeptics looking for a hedge."