US inflation keeps pressure on the Fed as Nvidia’s selloff spreads

• US headline CPI rose 0.4% in October, down from 0.6% in September but above the 0.3% consensus.
• Core CPI rose 0.3% for a third consecutive month, pointing to persistent inflation beyond energy.
• A 25-basis-point Fed hike in December remains the base case. Fed Governor Christopher Waller said a 50-basis-point move could warrant discussion if core inflation stays elevated.
• Nvidia shares were down nearly 27% since the start of November following Jensen Huang’s removal as CEO.
• The selloff spread to chipmakers, data center operators and energy companies as investors reassessed the pace of AI infrastructure spending.

US consumer prices rose 0.4% month on month in October, slowing from 0.6% in September. The reading still exceeded the 0.3% consensus. Energy accounted for most of the slowdown, with prices rising 0.7% after a 5.2% jump in September. Food prices rose 0.5% after holding steady the previous month, while shelter inflation eased to 0.3% from 0.4%.

Core CPI rose 0.3% for a third straight month, indicating that price pressures persisted beyond the energy shock. As expected, the Bureau of Labor Statistics did not publish year-on-year rates because the previous year’s government shutdown disrupted data collection. At an annualized pace, the recent monthly core CPI readings remain well above the 2% rate the Fed targets for PCE inflation.

Fed Governor Christopher Waller backed a 25-basis-point rate increase in December. He said a larger move of 50 basis points would warrant consideration if monthly core CPI inflation remained at around 0.3% or higher.

Waller described the US economy as strong and the labor market as stable. He also said inflation remained too high and monetary policy was less restrictive than he had previously thought. In his view, too small a hike amid persistent inflation could undermine the Fed’s credibility. He also stressed the need to avoid cooling the economy excessively. A quarter-point hike remains the base case for December.

Nvidia’s board removed co-founder and CEO Jensen Huang following reports about his private life. Chief Financial Officer Colette Kress took over as interim CEO, and the company began searching for a permanent successor. After the sharp selloff, Nvidia shares were down nearly 27% since the start of November.

Losses spread to semiconductor manufacturers, data center operators and energy companies. The leadership change at a key chip supplier prompted investors to reassess how quickly AI infrastructure projects would move ahead. Delays could push back orders for chips and servers and temper expectations for growth in electricity demand. Those expectations had supported valuations well beyond the technology sector. At the same time, the prospect of higher US interest rates put additional pressure on companies whose valuations depend heavily on earnings expected several years from now.