The Fed Is Driving the Market, Not AI. Why That’s Suddenly a Problem and 4 Other Things to Know Today.

A Federal Reserve speaker a day is keeping the selloff away and seems to be the perfect tonic for jittery markets.

For all the fears about an AI bubble, the Fed is still very much driving the U.S. stock market ahead of its final rate decision of the year next month. Gov. Christopher Waller called for a December cut on Monday, citing a weakening labor market and slowing inflation. That came after New York Fed President John Williams said Friday that he sees room for a near-term cut.

If Williams’ comments reversed the selling, Waller’s allowed the rebound to gather pace Monday.

The S&P 500 has jumped 2.5% over the past two sessions—its largest two-day gain since the middle of May when the U.S. and China agreed to cut tariffs on each other’s goods by 115 percentage points.

The main catalyst on this occasion has been the rapid shift in rate expectations. Markets are now pricing in an 81% probability of a rate cut in December, according to CME’s FedWatch tool. That’s a significant swing from around 30% less than a week ago.

While AI developments and concerns about tech valuations will never be far away from investors’ thoughts, a flurry of delayed economic data to conclude the holiday-shortened week are likely to keep the Fed in focus. The two issues are also linked—the AI bubble, if one exists, is unlikely to burst while the central bank continues on a rate-cutting path.

The problem for the stock market now is that a cut is very much priced in. That puts it in a dangerous position, particularly if rate-cut bets start to unwind again.

Anything other than a cut next month and investors will need to take their medicine again.

—Callum Keown

*** What’s Ahead for Markets in 2026? From “Liberation Day” tariffs to torrid rallies in AI stocks and gold, this year has been full of surprises. Join us on Dec. 11 at noon for discussions with investment strategists and money managers about the outlook for the economy and markets in 2026—and how to position your portfolio for success. Sign up here.

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Why Google’s AI Wins Are Bad News for Nvidia Investors

A whizzy new artificial intelligence-powered chatbot set tech stocks jockeying for leadership amid new concerns over demand for Nvidia’s chips. The new chatbot, Google’s Gemini 3, propelled parent Alphabet’s stock to a fresh record. Google is up 68% this year, outpacing the Magnificent Seven’s 22% gain as a group.

• Stocks swooned when China-based chatbot DeepSeek stunned the world with a model developed at a lower cost than models developed in the West. Google investors are just now starting to see the kind of impact Gemini 3 is likely to have on the AI trade over the coming months.
• Gemini 3 is reportedly faster, sharper, and performs with deeper reasoning than OpenAI’s ChatGPT, Elon Musk’s Grok, and Jeff Bezos-backed Perplexity. It fits neatly into the group’s broader family of apps and its market-leading search business. It is also priced at similar levels, or at a discount, to rival AI models.
• But Gemini 3 was trained primarily on Google’s Tensor Processing Units, or TPUs, versus rivals’ reliance on Nvidia chips. TPUs aren’t as flexible as Nvidia’s graphics processing units, but they are both cheaper to develop and use less power to run at full capacity. And that is spooking Wall Street.
• Ben Reitzes, a tech strategist at Melius Research, said some investors worry that Alphabet will win the AI war because of its custom TPU chip, which should give hyperscalers pause. Oracle, for example, bought billions of dollars of Nvidia chips to rent out on the cloud and could be undercut.

What’s Next: D.A. Davidson analyst Gil Luria estimates a stand-alone division housing Google’s DeepMind AI research lab and selling its TPUs would be worth nearly $1 trillion. Even a modest narrowing of Nvidia’s AI competitive advantages could shock markets if less expensive chips can perform equally well.

— Martin Baccardax

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Republicans Look to Health Savings Accounts For Obamacare Fix

Lawmakers are racing to relieve a problem for the 24.3 million Americans who buy health insurance through the Affordable Care Act marketplace, otherwise called Obamacare. Plan premiums are going to soar if subsidies aren’t extended. Republicans are looking at using health savings accounts and other ideas for answers.

• Next year’s premiums will soar by an average of 114%, or $1,016, for 22 million ACA enrollees that receive premium assistance, according to KFF, a health policy nonprofit. The extra premium subsidies Congress approved during the pandemic lowered costs for millions of consumers.
• Democrats want to extend current subsidies, while Republicans like Florida Republican Sen. Rick Scott prefer alternatives such as giving money directly to people in health savings accounts. Louisiana Republican Sen. Bill Cassidy proposed redirecting the premium subsidies to “patient-driven accounts.”
• President Donald Trump is reportedly planning to propose a two-year extension of Affordable Care Act premium subsidies while a solution is ironed out. Officials from more than a dozen states say Americans who rely on Obamacare subsidies have postponed enrolling for 2026 because of premium hikes, Reuters reported.
• It’s unclear how much government-funded health-savings accounts would lower costs for ACA plan users. But changes to the current system could have implications for the insurers in the system, including Centene, the largest plan provider on ACA marketplaces, Oscar Health, and Molina Healthcare.

What’s Next: Without enhanced premium tax credits, more than five million Americans are expected to lose coverage by 2034, according to estimates by the nonpartisan Congressional Budget Office. Permanently extending enhanced subsidies would increase the federal budget deficit by $350 billion from 2026 to 2035, CBO projected.

— Elizabeth O’Brien, Nate Wolf, and Janet H. Cho

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Trump, Xi Make Plans Amid Rising Taiwan Tensions

In a sign of detente, President Donald Trump spoke with China’s President Xi Jinping by telephone and afterward described “significant progress on both sides.” Trump accepted an invitation by Xi to visit Beijing in April and invited Xi to visit the U.S. later next year.

• The call coincided with rising Taiwan tensions and Trump’s push for a solution to Russia’s war in Ukraine. Chinese officials, in a readout after the call, focused on the broad relationship with the U.S. and didn’t mention soybean purchases, state visits, or Chinese access to advanced U.S. semiconductors.
• But in a social media post hours later, Trump described a call that covered Ukraine, Russia, fentanyl, soybeans, and other farm products. He portrayed it as a follow-up to the recent meeting in South Korea. China said both sides were implementing the deal they agreed to in South Korea.
• Analysts have been awaiting details of that truce, which the U.S. has said included Beijing agreeing to buy 12 million metric tons of soybeans by year-end. However, China has bought just 1.5 million metric tons, according to Agriculture Secretary Brooke Rollins.
• Taiwan is critical to the semiconductor supply chain and home to Taiwan Semiconductor Manufacturing, which produces 90% of advanced chips. A panel that advises Congress on issues related to China last week flagged growing concerns about Beijing’s increased activity around Taiwan and in the Pacific islands.

What’s Next: While neither side mentioned China’s access to more advanced semiconductor chips, Commerce Secretary Howard Lutnick said in a Bloomberg TV interview that Trump would speak with his advisors about whether the U.S. would allow Nvidia to sell H200 chips to China.

— Reshma Kapadia

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President Wants to Accelerate Scientific, Engineering Discovery Through AI

President Donald Trump has rolled out a “Genesis Mission,” directing the National Laboratories to build an artificial-intelligence platform to accelerate scientific and engineering discovery, and use federal data sets and supercomputers to solve the thorniest problems in medicine, energy, and national security.

• The biggest expense will be getting enough computing power to create and run these new scientific AI models. The National Labs are already home to massive supercomputers, including the three most powerful, according to the TOP500 list of the world’s supercomputers.
• The Energy Department has said that several supercomputers are being built through “public-private” collaborations with Nvidia, Advanced Micro Devices, Dell Technologies, and Oracle. The administration has hinted about partnerships with major cloud-computing providers, such as Amazon Web Services, Microsoft Azure, and Google Cloud.
• White House Office of Science and Technology Policy Director Michael Kratsios called Genesis “the largest marshaling of federal scientific resources since the Apollo program,” and claimed it will shorten discovery timelines from years “to days or even hours.”
• The Genesis Mission’s focus on basic research stands in direct opposition to the administration’s attempts to implement large cuts in scientific funding and research, and could indicate that the White House believes AI can accelerate science at a lower cost.

What’s Next: The Energy Department hasn’t said how the program will work in practice or where the federal government’s contribution will come from. Congress at some point will likely have to allocate funding for the program.

— Adam Levin and Janet H. Cho

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner