Nvidia Won the Week. Warsh Won Friday.

GOOD MORNING, Nvidia gave the AI trade exactly what it wanted last week: triple-digit Data Center growth, a $108 billion next-quarter revenue guide and another sharp acceleration expected into fiscal 2028. But Friday belonged to the Fed. Chair Kevin Warsh used Jackson Hole to say inflation is still too high and that the central bank has more work to do if it cannot gain confidence that prices are moving back toward 2%, sending short Treasury yields and the dollar higher while the Nasdaq gave back part of Thursday's AI rally. The market enters a new week with two strong narratives colliding: AI earnings are still expanding fast, but the bar for easier money just moved higher.

MARKETS | TLDR

Wall Street finished Friday lower: The S&P 500 fell 0.25%, the Nasdaq lost 0.52% and the Dow slipped 0.02% after Warsh's Jackson Hole remarks pushed traders toward a more hawkish September-rate view.
Rates and the dollar did most of the repricing: The probability of at least a 25-basis-point September hike jumped to 57.5% from about 35% before Warsh spoke, while the dollar index climbed 0.59% to 99.69; the 2-year Treasury yield also rose sharply.
Oil ended the week below $90 Brent: Brent settled Friday at $89.31 a barrel and WTI at $83.40 after diplomatic efforts around the Strait of Hormuz helped ease some immediate supply fears, though the route remained a geopolitical risk.

FED RESET

Warsh Just Changed the Question for Markets

Kevin Warsh did not give investors a September decision at Jackson Hole. He gave them a standard. The Fed, he said, must be confident that underlying inflation is moving clearly and quickly enough toward 2%; otherwise, policymakers still have "work to do." He also argued that current credit and loan markets show few signs that policy is restrictive. Rate futures responded by moving the implied probability of a September hike to roughly 60%, up from about 40% before the speech.

That matters because the market had spent Thursday celebrating Nvidia's earnings as proof that the AI investment cycle still has room to run. Friday showed the other side of that trade. Strong growth can support earnings, but it can also give the Fed more room to keep policy tight if inflation remains sticky. The Nasdaq fell 0.52% and rate-sensitive small caps weakened more sharply, even though the fundamental AI story had not deteriorated overnight.

The next test is data, not rhetoric. August employment figures arrive Friday, with JOLTS and manufacturing data earlier in the week. Warsh explicitly stopped short of offering forward guidance, and the Fed still has another inflation report before the September 15-16 meeting. The market has repriced the probability of a hike; it has not yet received the evidence that forces one.

AI SCALE

Nvidia Cleared the Earnings Bar. The Capital Bar Is Next.

Nvidia reported second-quarter revenue of $96.2 billion, up 106% from a year earlier, with Data Center revenue reaching $89.0 billion, up 117%. The company expects about $108 billion of revenue in the third quarter and said its preliminary expectation is for fiscal 2028 revenue to grow roughly 70% year over year. Vera Rubin is already ramping into production, while supply is expected to remain a bottleneck through at least the end of fiscal 2028.

The numbers make the demand argument harder to dismiss. The more interesting question is what has to happen around Nvidia for that growth to persist. Hyperscalers, AI labs and infrastructure providers must keep financing ever-larger clusters; power, networking, memory and data-center capacity all have to scale alongside GPUs; and customers ultimately need enough revenue or productivity gains to justify the spend. Nvidia's results show compute demand is real. They do not by themselves settle the return-on-capital question for the companies funding it.

Marvell's post-earnings reaction made that distinction visible. The chipmaker raised its fiscal 2027 and 2028 revenue forecasts and has a Google custom-chip agreement that could generate as much as $120 billion through fiscal 2033, yet shares fell as investors focused on how much of that contribution sits further out, with management pointing to fiscal 2029 for a more material impact. AI exposure still commands attention; timing and cash-flow conversion increasingly determine how much investors will pay for it.

HEADLINES

PayPal's takeover premium disappears: Shares sank after an Advent-Stripe consortium walked away from a proposed acquisition, shifting the valuation debate back to whether new CEO Enrique Lores can produce a durable operating turnaround without a buyer.
Gap gets rewarded for fixing the right brand: The retailer raised its annual profit forecast and shares surged, but Old Navy's comparable sales fell 4% — making the largest brand, rather than the stronger Gap banner, the key variable for the next leg of the turnaround.
Tokyo inflation keeps the BOJ in play: Tokyo core CPI accelerated to 1.8% in August and a measure excluding fresh food and fuel reached 2.0%, reinforcing expectations that Japan could tighten again as global bond markets already face upward pressure.
Canada's growth story runs into a rates problem: Second-quarter Canadian growth came in strong, but the TSX still fell as higher global yields and questions over the durability of the expansion outweighed the headline GDP number.
The dollar gets its clearest weekly win in months: The dollar index was up nearly 0.9% for the week after Warsh's speech, showing how quickly a tougher Fed narrative can spill from bonds into currencies and tighten financial conditions beyond U.S. equities.

UPCOMING

JOLTS — September 1: July job openings and turnover will be the first labor-market test after Warsh emphasized that employment remains stable enough for the Fed to focus predominantly on inflation.
ISM Manufacturing — September 1: Investors will watch not only activity but prices and supplier conditions, because a resilient factory sector paired with sticky input costs would strengthen the case for tighter policy.
Broadcom earnings — September 2: Broadcom will provide another read on custom AI accelerators and networking demand, an important check on whether the spending wave Nvidia sees is broadening across the semiconductor stack.
August payrolls — September 4: Friday's Employment Situation is the week's central Fed catalyst. A resilient jobs report would give Warsh more room to prioritize inflation; a sharp slowdown would complicate the newly hawkish rate setup.

DEEP INSIGTHS

Kevin Warsh's Jackson Hole Speech: In Our Time

Read the speech itself for the policy logic behind Friday's repricing: Warsh treats the 2% inflation objective as fixed, argues that financial conditions show little evidence of restraint and frames short-term interest rates — rather than routine forward guidance — as the Fed's principal policy tool.

Nvidia Q2 FY2027 10-Q

The filing goes beyond the earnings headline. It shows Data Center revenue up 117% year over year, hyperscale revenue more than doubling and China Data Center shipments accounting for less than 1% of segment revenue — useful context for understanding how broad the current demand base is and where geographic exposure still matters.