The Fed Blinked. AI Took the Rally.

GOOD MORNING, Wall Street finally got relief from the rates trade. Fed Governor Christopher Waller said he could support holding rates steady in September if inflation keeps cooling, cutting near-term hike odds and pulling Treasury yields lower. Stocks responded immediately, with the Nasdaq leading a broad rebound. But the bigger signal came from where investors chose to take risk: megacap tech and AI names. Nvidia announced a nearly $13 billion deal for Hugging Face, Snowflake surged after stronger guidance, and even with oil still above $90, the market showed it is willing to buy the AI complex when rates stop moving against it.

MARKETS | TLDR

Wall Street rallied as Fed hike fears eased: The S&P 500 gained about 1.1%, the Dow rose roughly 1.2% and the Nasdaq added around 1.4% after Waller signaled support for holding rates steady if inflation continues to cool.
Treasury yields fell: The 10-year yield moved back toward 4.77% as traders cut the probability of a September hike to roughly 50%, down from more than 60% a day earlier.
AI and megacap tech led the rebound: Nvidia rose about 1.8%, Meta gained roughly 3% and Microsoft climbed around 2.7%, while Snowflake jumped more than 16% after lifting its outlook.

FED

One Fed Comment Was Enough to Change the Tape

Fed Governor Christopher Waller said Thursday that he is leaning toward keeping rates unchanged at the September 15-16 meeting if August inflation data shows continued progress toward the Fed’s 2% target. He also left the other door open: if inflation comes in hot, he would consider supporting a hike. Markets focused on the first half of that message. Rate-hike odds fell toward 50%, bond yields eased and all three major U.S. indexes rallied more than 1%.

The move matters because the market had spent much of the week repricing tighter policy on the back of higher oil prices, persistent inflation and a global bond selloff. Waller did not declare victory on inflation. What he changed was the timing risk. If policymakers are willing to “give disinflation a chance,” then equities get a temporary break from the assumption that every strong data point must immediately translate into higher rates.

The caveat is that this relief is conditional. Waller explicitly said the next CPI report could still push him toward tighter policy, while Friday’s jobs report arrives first. Oil also remains above $90 and Middle East risks are still elevated. So Thursday’s rally was less a new policy regime than a reminder that the market remains highly sensitive to each piece of incoming inflation data.

AI

Nvidia Is Buying More Than a Developer Platform

Nvidia agreed to acquire Hugging Face for $12.93 billion, one of the chipmaker’s largest deals to date. Hugging Face has become a central distribution and collaboration layer for open AI models, giving developers access to models, datasets and tooling across multiple hardware platforms. Nvidia said the platform would remain open and interoperable after the acquisition.

The strategic logic goes beyond adding another software asset. Nvidia’s largest customers — including Meta, Microsoft and OpenAI — are building more of their own chips, threatening to reduce their dependence on Nvidia over time. Owning a platform used by developers across the AI ecosystem gives Nvidia another way to influence where workloads run, which models gain adoption and how tightly software stays connected to its hardware stack.

That also creates a tension investors should watch. Hugging Face has historically positioned itself as hardware-neutral, and analysts have already raised questions about whether Nvidia ownership could tilt the platform toward its own accelerators. The deal strengthens Nvidia’s position across the stack, but the more control it gains over AI infrastructure and distribution, the more regulatory and ecosystem resistance it may invite.

HEADLINES

Snowflake surged after raising its outlook: Shares jumped more than 16% as stronger cloud demand and AI-related workloads helped the company beat expectations, adding another signal that enterprise AI spending is moving beyond chips into data infrastructure.
Broadcom’s AI forecast kept getting bigger — but the stock fell: The company projected enormous AI chip revenue growth through 2028, but a slightly soft near-term forecast showed how unforgiving expectations have become for AI infrastructure winners.
Tesla began limited Cybercab rides in Austin: The launch moved Tesla’s autonomous-vehicle story another step from demo to deployment, but NHTSA said it was evaluating the program and regulatory constraints still limit broader rollout.
Adobe named Anil Chakravarthy CEO: The leadership transition comes as Adobe tries to prove that generative AI can reinforce rather than erode its position in creative software.
The yen jumped as BOJ tightening bets grew: The currency gained roughly 2% against the dollar, its strongest New York close since the U.S.-Iran war began, showing that global rate divergence is becoming another important cross-asset driver.

UPCOMING

U.S. jobs report — September 4: August payrolls are the next immediate test of whether the economy is strong enough to keep pressure on the Fed despite Waller’s more patient tone.
Labor Day — September 7: U.S. equity and options markets are closed Monday, creating a longer gap before markets can absorb any weekend geopolitical developments.
U.S. PPI — September 10: Producer inflation will provide the first major look next week at whether higher energy and supply costs are spreading through the pipeline.
U.S. CPI — September 11: Waller explicitly framed August inflation as decisive for his September vote, making CPI the clearest policy catalyst ahead of the Fed meeting.

DEEP INSIGTHS

Christopher Waller: The Economic Outlook and Some Comments on My Policy Communication

Read this because Thursday’s market rally was built directly on Waller’s reaction function. The important point is not that he turned dovish, but that he described a conditional threshold: continued disinflation argues for holding, while renewed inflation could justify tightening. That framework makes the next jobs and CPI reports unusually important.

Bond Selloff Is Likely Amplified by an Obscure Economic Rate

This is useful context for why yields may remain structurally higher even if the Fed pauses. The piece examines the idea that the neutral interest rate, or R-star, is rising as AI infrastructure investment and government borrowing increase demand for capital. If that is right, the AI boom is not only supporting tech earnings — it may also be contributing to the higher discount rates that pressure those same valuations.