A Week of Whiplash: AI Boom, Bitcoin Busts, and the Fed Shrugs

It was a rollercoaster week for the markets, with prices gyrating wildly amidst shifting economic signals, earnings surprises, and renewed volatility across major asset classes.

The tone was set midweek by the release of the Federal Open Market Committee (FOMC) minutes from the October meeting which revealed unusually sharp divisions among central bank policymakers over the future path of interest rates. While some members argued that slowing economic momentum warrants further easing, others emphasised still elevated inflation and a surprisingly resilient market as reasons to delay.

As a result, rate expectations quickly swung. Markets started the week forecasting the probability of a 60% chance of a rate cut, dropped to 30% following the FOMC minutes, and ended the week at 80% following comments from two prominent Fed governors that pointed to an easing bias.

This week’s economic data did little to settle the debate. The long-delayed September employment report showed the US economy adding 119,000 new jobs, more than double the expectations and reversing August’s revised job loss. However, the unemployment rate crept up to 4.4%, its highest since 2021, while wage growth moderated slightly.

Turning to corporate news, AI remained the dominant narrative. Google parent, Alphabet, following last week’s news of Berkshire Hathaway taking a stake, announced the launch of its latest AI model, Gemini 3, with enhanced reasoning and coding capabilities that will be integrated in key segments such as Search, Android and YouTube.

Yet it was Nvidia that once again took the spotlight. Nvidia posted another blockbuster quarter, with revenue soaring to $57bn, up 62% from last year, and its data centre sales hitting a record $51.2bn. CEO Jensen Huang struck an emphatic tone, declaring that “AI is going everywhere, doing everything, all at once”, with demand for the Company’s new Blackwell chips “off the charts”.

Markets initially celebrated, sending shares up 6% after hours. But enthusiasm faded quickly. Concerns over rising inventories and deferred revenue patterns triggered a sharp reversal, dragging the S&P 500 down 1.5%, the Nasdaq 2.4% and the Dow 0.8% on Thursday.

The wobble highlighted a growing theme, AI is no longer just a technology trend, it has become a central driver of US economic momentum. Analysts estimate that AI related capital expenditure may have contributed half of real GDP growth in the first half of 2025. Consumer spending has been buoyed too, with JPMorgan estimating that rising AI stock valuations, added nearly $180bn through the wealth effect alone.

Outside of AI however, the economic backdrop looks a lot softer. Job creation is slowing, unemployment is edging up, and non-AI business investment has been largely stagnant since 2019. With AI driven investment now propping up everything from corporate spending to consumer wealth, Nvidia’s trajectory has become inseparable from the market’s own.

The vulnerability became even clearer in crypto markets. Less than two months after touching an all-time high of $126,000, Bitcoin plunged more than 35%, briefly breaking below $80,000 on Friday for the first time since April before a brief relief rally over the weekend. The decline closely mirrored the broader retreat in risk assets following stronger than expected US jobs data, which reduced the likelihood of imminent rate cuts and tightened liquidity across the board.

The sell-off was driven by a perfect storm of factors. Institutional demand weakened, with over $900m withdrawn from spot Bitcoin ETFs in a single day. Corporate treasuries and long-term holders also trimmed positions. Even MicroStrategy’s latest purchase, its largest since July, was smaller relative to previous cycles.

Looking to the week ahead, it will be a shortened trading week in the US as markets pause for Thanksgiving, followed by Black Friday, which will offer an early read on global consumer appetite heading into Christmas. In the UK, focus shifts to Chancellor Rachel Reeve’s’ long-delayed, highly anticipated, Budget, as she seeks to fill an estimated £30 billion ‘black hole’ in the country’s finances. Expectations are mixed, and bond markets remain deeply concerned, about whether the measures will meaningfully address the country's economic challenges.

(Cover Image Source: Michael Förtsch)