What caused Nvidia's nasty reversal Friday? Look to the Fed for clues

Breaking news from the markets: Twenty-four billion shares. I'm talking about what happened to the stock of Nvidia when I left the office at 11 a. ET Friday for a day off to spend time in the final throes of my garden.

26 at the highs of the day, before closing at $217. I am glad I didn't see it unfold. It might have been how sickening I felt back in July after watching Intel unravel in the wake of that great quarter that coincided with the unraveling of Situational Awareness, the AI-focused hedge fund run by boy wonder Leopold Aschenbrenner.

Economic Details

If you remember that moment, we saw how quickly those downward moves could evolve. Intel jumped in extended trading the night it reported, only to sink the following day during regular trading. The sell-off in Nvidia came in the wake of a magnificent quarter , like Intel, where the move up was so powerful but not as powerful as the move down.

Intel happened faster, but the pattern was ridiculously similar. One key difference: the selling hit Intel during the first session after reporting. With Nvidia, we saw a nearly 9% pop Thursday after reporting Wednesday night; it was Friday's session when the sellers pounced, erasing more than half of Thursday's gain.

Oddly, the Situational shorts didn't unravel until last week, when Salesforce had a celebratory gallop. It made me wonder how many people really believed in the "SaaSpocalypse" theory — the belief that software-as-a-service companies had no future in a world of vibe-coded applications and more "agentic workers" than humans. After all, we never got bad quarters from Workday or ServiceNow or Salesforce .

Analyst Views

They kept turning in decent quarters. I am convinced that Situational had more going for it than just the "long hardware" thesis. A betting man would say he made himself right with his shorts, whether they be Microsoft or Workday or all the others, including everything in the ill-fated IGV, the colloquial name for the iShares Expanded Tech-Software Sector ETF .

I believe that Situational did something I had only seen when the Securities and Exchange Commission foolishly scrapped the uptick rule in 2007. The uptick rule forbade a short seller from knocking a stock down by endlessly selling it no matter what. Before that you had to wait for an uptick in trading, essentially a real buyer.

Once that protection was abandoned, the stocks of many financials were easily obliterated. It isn't "blamed" much, but the abandonment of the uptick rule, established to stop exactly what occurred in 2007-2008, was part of the swiftness with which institutions were felled. I think that Situational had a unique trading style that was the equivalent of getting short aggressively —and then loud — among fellow travelers.

Economists are analysing what the news means for the markets.