AI Boom vs Fed Policy: Dual Market Drivers Analysis (Nov 28, 2025)

On November 28, 2025, Bill Lee (Milken Institute) and Storm Uru (Liontrust Asset Management) discussed whether the AI boom or Federal Reserve interest rate policy would be the biggest driver of market action over the next year. The discussion was published as a YouTube video [6].

• Broader Market
  : U.S. indices (S&P500, NASDAQ, DJI, Russell 2000) have shown positive momentum over the past 10 trading days, with the Russell 2000 (small-cap index) posting a +2.00% gain on Nov 25, indicating optimism about rate cuts [0].
• Sector Performance
  : Energy (+1.76%) and Consumer Defensive (+1.31%) sectors led gains on Nov 28, while the Technology sector (AI-related) underperformed with a +0.15% increase [1].
• AI Sector
  : Nvidia (NVDA) faced significant headwinds after Google unveiled new AI superchips and Meta Platforms explored adopting Google’s TPUs, leading to a £195 billion market cap loss for NVDA [2].

• Fed Policy
  : Market expectations for a December rate cut (72% chance per U.S. Bank, 83% per Yahoo Finance) are driving sentiment across rate-sensitive sectors like Financials (+1.10%) and Real Estate (+0.33%) [1,4].
• AI Competition
  : Google’s entry into AI hardware as a mainstream alternative to NVDA’s GPUs could reshape the AI supply chain over the next 12 months [2].

• Positive
  : Broader market sentiment is upbeat due to Fed rate cut hopes and small-cap strength [0,4].
• Mixed
  : AI sector sentiment is divided—NVDA faces competition risks, while Microsoft (MSFT) benefited from antitrust clearance in France [2,3].

1. Nvidia Market Cap Loss
   : £195 billion (≈$250 billion) due to Google’s AI chip competition [2].
2. Fed Rate Cut Probability
   : 72-83% for a 25bps cut at the Dec 9-10 meeting [4].
3. Sector Performance
   : Energy (+1.76%), Technology (+0.15%) (Nov 28) [1].
4. Russell 2000 Gain
   : +2.00% (Nov25) [0].
5. Current Fed Funds Rate
   : 3.75-4.00% [4].

• NVDA
  : Negative (AI competition risk) [2].
• MSFT
  : Positive (antitrust clearance) [3].
• GOOGL
  : Positive (AI chip launch) [2].

• Technology
  : Mixed (AI hardware competition vs. broader tech stability).
• Financial Services
  : Positive (rate cut expectations) [1].
• Energy
  : Outperforming (leading sector on Nov28) [1].

1. AI Competition
   : Extent of Meta’s potential shift to Google TPUs (percentage of AI hardware budget).
2. Fed Policy
   : Exact size of the Dec rate cut (25bps or more) and forward guidance for 2026.
3. NVDA Response
   : Product roadmap or pricing strategies to counter Google’s TPUs.
4. Energy Sector
   : Sustainability of Energy’s leading performance (linked to oil prices or seasonal demand).

The discussion between Lee and Uru highlights two key drivers—AI (long-term structural) and Fed policy (short-term cyclical). The current market data shows both are at play: broader market up due to Fed hopes, but AI sector (specifically NVDA) facing headwinds from competition.

1. AI Competition Risk
   : “Users should be aware that Google’s new AI superchips and Meta’s potential shift to Google TPUs could significantly impact Nvidia’s market share and valuation” [2].
2. Fed Policy Risk
   : “This development raises concerns about potential market volatility if the Federal Reserve does not meet rate cut expectations in December” [4].
3. Tech Sector Margin Risk
   : AI hardware competition may lead to margin compression for players like NVDA [2].
4. Energy Sector Volatility
   : Energy’s leading performance is sensitive to global oil prices and geopolitical events—users should monitor these factors closely [1].

[0] Market Indices Data (2025-11-13 to 2025-11-26) [Tool Output].
[1] Sector Performance Analysis (2025-11-28) [Tool Output].
[2] IBTimes UK: “AI Shocker: Nvidia Loses £195 Billion as Google Unveils Its Own Superchips” (2025-11-28) [Tool Output].
[3] Gurufocus: “Microsoft Cleared as French Antitrust Watchdog Dismisses Qwant Complaint” (2025-11-28) [Tool Output].
[4] US Bank: “Federal Reserve Calibrates Interest Rate Policy Amid Softer Hiring…” (2025-10-31); Yahoo Finance: “When will mortgage rates go down significantly?” (2025-11-28) [Tool Output].
[6] YouTube Video: “What is the biggest driver of market action? The AI boom or the Fed?” (2025-11-28) [Original Event Source: https://www.youtube.com/watch?v=1dE3rrjMaqo].

: This analysis is for informational purposes only and does not constitute investment advice. All decisions should be based on personal research and professional guidance.