The stock market on Friday was set for its best week in months, as investors brushed off concerns about the resignation of Jensen Huang as chief executive of Nvidia, the behemoth chip maker.
The S&P 500 is on course to rise more than 3 percent for the week, which would be its best five-day stretch since early August. The Nasdaq Composite has also risen more than 3 percent so far this week.
The moves are an end to weeks of losses in which concerns about a slowdown in the growth of the artificial intelligence industry weighed on the market and prompted sharp sell-offs in many of the tech companies that have led the market higher in recent years.
“The market is in an incredibly good position to move higher,” said Mark Hackett, chief market strategist for the investment management arm at Nationwide, an insurance company. “Once you get through the news-driven sentiment, you can get back to focusing on fundamentals. That is hopefully what we are seeing.”
The market was on edge after revelations that Mr. Huang, a standard-bearer for the A.I. revolution, had engaged in an extramarital affair with a woman believed to be a Chinese spy.
After reports that Mr. Huang had a second affair, this time with a subordinate employee, Nvidia’s board announced the chief executive’s departure on Thursday morning, a dramatic fall from grace for the tech mogul. Nvidia’s shares dropped on Thursday, and its stock is now about 30 percent below its all-time high, set just over a month ago. The company, which is the second-largest member of the S&P 500 index, behind Apple, is trading about 12 percent lower for the year.
Importantly, analysts said, Nvidia’s big drop has not spread to the rest of the market. Rival chip makers’ stocks have risen, as have A.I. stocks more broadly. As of Friday morning, major indexes remain on course to record their first weekly gain in more than a month, with futures indicating a relatively subdued open to trading in New York. Nvidia’s stock reversed some of its losses in premarket trading, rising about 2 percent.
“We doubt the fundamentals supporting the A.I. industrial revolution are altered by Jensen Huang’s departure from Nvidia,” analysts at Raymond James, a financial services company, said, adding that “‘hate selling’ is understandable, but objectively, fundamentals appear to have changed very little.”
Analysts who cover Nvidia have been adjusting their expectations this week, based on forecasts compiled by Bloomberg. While many analysts have cut their share price targets sharply, they still expect the stock to trade markedly higher than where it currently trades, at around $166.
Harlan Sur at JPMorgan lowered his price target for the company to $215 from $320 over the summer. Atif Malik at Citi lowered his to $225 from $315 earlier this month. Karl Ackerman at BNP Paribas has kept his target at $345.
Stock investors have also brushed off a sharp rise in interest rates this week, driven higher by data showing U.S. consumer prices rising more quickly than expected.
The 10-year Treasury yield, which underpins interest rates for mortgages, business loans and other types of debt throughout the economy, has risen more than 0.2 percentage points so far this week, on course for one of its highest moves of the year.
Investors now expect the Federal Reserve to raise interest rates at least 0.75 percentage points over the next 12 months, starting with a quarter-point raise in December. A week ago, investors were forecasting just one quarter-point increase over the same period.
The two-year Treasury yield, which is sensitive to changes in expectations for Fed rate moves, has risen more than 0.3 percentage points higher this week, its largest one-week rise in more than four years.
Beth Hammack, president of the Federal Reserve Bank of Cleveland, said on Thursday that the central bank needed “to move to a restrictive stance of policy to help bring inflation back down,” meaning a need to raise interest rates further.
“If we don’t,” she added, “I worry that an inflationary mind-set could start taking hold.”
