Nvidia hits a new all-time high, AI computing power and tech sector stage a major rebound! Non-farm payrolls increase by only 29,000 + oil prices decline, Fed rate hike bets cool off significantly

According to Intelligent Finance APP, following the release of the latest Nonfarm Payrolls data, market bets on a Federal Reserve rate hike in October have cooled. Combined with international oil prices slipping below $100 on a series of positive catalysts, this jointly fueled a strong rebound in US and European tech stocks, especially among US AI computing power-themed stocks, which had recently faced sustained suppression from rising yields on 10-year and longer-dated US Treasuries and sharply heightened rate hike expectations, further affecting DCF valuation models. “The AI computing power superpower” Nvidia’s share price even hit a record high immediately after the market opened on Friday.

U.S. employment growth in September came in below expectations and wage growth slowed, indicating employers are showing some caution in hiring against the backdrop of rising costs. Regions Financial Corp. Chief Economist Richard Moody said, "What surprises me is that this has lasted more than a year. The pattern of low hiring and low layoffs persists."

Overall, the cooling of Nonfarm Payrolls and retreat in oil prices are opening a “valuation decompression window” for AI computing power stocks and global tech stocks that rely on a cooling DCF-based valuation system. U.S. Nonfarm Payrolls in September increased by just 29,000, with wage growth slowing simultaneously, prompting markets to further reduce their bets on an October Fed rate hike, with relevant probabilities at one point dropping below 10%. Meanwhile, expectations of Middle East crude supply returning and Europe’s coordinated release of strategic reserves drove Brent crude below $100 per barrel. The simultaneous cooling of employment and energy prices led to a fall in U.S. Treasury yields, providing additional macro catalysts for tech stock rebounds in the US and Europe, with Nasdaq 100 index futures rising by about 1.2%.

The JPMorgan strategist team recently released a report stating that it particularly favors the opportunity to reallocate as position crowding eases, valuations retreat, and profit resilience emerges, particularly with a preference for AI semiconductors. According to JPMorgan’s latest research, since June, forecasts for next-12-months-per-share earnings in semiconductors have been raised by about 30%, while software earnings forecasts have seen little improvement; the firm cited hyperscaler cloud capital expenditure outlooks of about $950 billion in 2026, $1.4 trillion in 2027, and $3 trillion in 2030.

Data released by the U.S. Bureau of Labor Statistics on Friday showed that Nonfarm Payrolls increased by 29,000 last month, with the previous two months’ figures being significantly revised downward. This increase was below all benchmark forecasts in economist survey reports before the official release. The unemployment rate rose to 4.2%, partly reflecting a notable expansion of the labor force.

Strong consumer spending and robust business investment have supported hiring, though many cost-conscious employers remain reluctant to expand headcounts. However, layoffs remain at relatively low levels.

“September’s Nonfarm Payrolls data show that hiring slowed after a strong August. Combined with the rise in unemployment, this report does not support a Fed rate hike in October. We expect the Fed to keep rates unchanged for the remainder of the year,” said Anna Wong, Andrew Zatlin, and Eliza Winger, economists at Bloomberg Intelligence.

With the unemployment rate still near historical lows, Fed officials can continue to focus on inflation when considering when to hike rates again. After the data release, traders in the interest rate futures market significantly reduced their bets on a Fed hike in October, with probabilities dropping to less than 10% post-data from nearly 80% pre-release.

“For the Fed, this data should be enough to completely rule out the possibility of an October rate hike,” said Thomas Simons, chief U.S. economist at Jefferies, a Wall Street financial giant, in a report. “Now it appears those policymakers emphasizing patience before another hike seem more likely to remain cautious.”

Following the data release, S&P 500 futures rose, long-term U.S. Treasury yields and the dollar index all fell significantly.

This is the last employment report before the U.S. midterm election in November, and economic conditions are expected to be an important factor influencing voters. The labor market is just one part; despite ongoing consumer spending, concerns about the cost of living remain front and center.

It is understood that breakdowns of the Nonfarm Payrolls data show that local government employment in the U.S. declined, and some industries most susceptible to AI impact also saw reductions, including information, professional and business services, and finance. Data center and other AI-related infrastructure investment supported increased hiring in construction and manufacturing.

Employment in healthcare and the leisure and hospitality sectors also grew. At the same time, average hourly earnings increased by just 0.1% from August, below expectations; the year-over-year growth was 3%, the slowest annual wage gain since 2021.

The employment report is composed of two surveys: one of employers for the Nonfarm data, and another of households, which provides data such as the unemployment rate and labor force participation rate. The household survey also has an independent employment metric, which rose significantly this month.

Labor force participation in September—the proportion of the population working or actively seeking work—rose to 61.8%, hitting a four-month high.

However, labor market stability also has drawbacks. In some cases, insufficient turnover leaves workers feeling trapped in undesired jobs, making it harder for the unemployed to find new work. This may help explain why many Americans are pessimistic about the job market: fewer people think jobs are plentiful, and more think they are hard to get.

29,000 Nonfarm Payrolls Repel Rate Hike Bets, Tech Stocks Welcome “Valuation Decompression Window”

Semiconductors and AI computing power sectors, which were previously suppressed by both rising long-term yields and expectations of higher interest rates, are now becoming the key drivers in this rebound. The European tech sector had already risen about 2.1% before the Nonfarm announcement, led by semiconductor equipment giants; in early US market trading, AI computing juggernaut Nvidia showed the most impressive gains, jumping more than 2% to a record $236.42 at 21:30 Beijing time, with a total market cap of an astonishing $5.7 trillion. For AI infrastructure companies with still-upward profit forecasts, easing rate pressures mean valuation headwinds are waning, opening an active window for the market to transition from “valuation killing” to “earnings take over.”

Nonfarm employment and wages cooled in tandem; with recovering crude supply and falling international oil prices, two forces previously weighing on tech stocks—further policy tightening and high-rate pressure on future profits’ valuations—are being alleviated. U.S. Nonfarm Payrolls in September increased by just 29,000, far below the market expectation of about 90,000; July and August numbers were revised down by a total of 60,000. Meanwhile, average hourly earnings rose only 0.1% month-on-month and 3.0% year-on-year, unemployment climbed to 4.2%, and labor force participation increased to 61.8%. This data significantly weakens the case for “persistently hot jobs and wages forcing the Fed to quickly hike again”; the rising participation shows the higher unemployment rate is partly due to more people entering the workforce, not just worsening layoffs.

The global interest rate futures market quickly adjusted tightening bets downward. As of the opening of the US stock market at 21:30 Beijing time on October 2, the probability of an October hike dropped to below 10%; yields on 2-year, 10-year, and 30-year US Treasuries fell by around 7, 6, and 4 basis points to 4.716%, 5.176%, and 5.569% respectively, while the dollar index fell about 0.2%. Short-term yields, most sensitive to policy expectations, fell the most; long-term rates fell in tandem, providing direct relief to stock valuations and new corporate financing costs.

The decline in oil prices also added another layer of support to this “valuation decompression wave”—and this trend began before the Nonfarm release. As of 20:00 Beijing time, Brent crude was at $99.78 per barrel, down 2.47%; WTI was $89.55, down 3.57%. However, compared with the pre-war closing price on February 27, both are still up about 37.7% and 33.6%, so the energy shock is easing but the cumulative increase isn’t gone.

The improvements on the supply side are substantive: according to informed sources, the east-west oil pipeline throughput is near 6 million barrels per day, about 86% of its 7 million barrel design capacity; after deducting West Coast refinery usage, about 4.5 million barrels per day are available for export. Meanwhile, France is pushing for coordinated strategic stockpiles release, with current proposals including 50 million barrels of diesel from Europe and 50 million barrels of crude by the International Energy Agency members. Notably, this refers to pipeline resumption and reserve release plans, not direct completion of G7 output increases or releases.

However, risks remain around US-Iranian military tensions: the US continues to increase its military presence in the Middle East, while Iran is ready to escalate counterattacks if attacked. The current retreat in oil prices reflects improved supply’s impact on the risk premium rather than a downgrade in geopolitical conflict risks.

From "Valuation Killing" to "Earnings Take Over”: JPMorgan Sees New Leg Higher for Tech! Can AI Computing Power and Broader Tech Stocks Enter the “Earnings Relay Zone”?

These changes indeed constitute major positive catalysts for global tech stocks, especially semiconductors and the AI computing power theme, with the core being: valuation headwinds on earnings growth are easing. Global long bonds' reactions must be viewed by session: US Treasuries fell clearly after Nonfarm; UK 10-year yields had dropped to around 5.33% along with oil prices during the European morning. Japan’s mainstream bond trading sessions ended before the US Nonfarm release, and its 10-year yield remains near the 3.1% high, influenced by Tokyo inflation and Bank of Japan policy expectations. Thus, the easing of bond market pressures in the US and Europe is confirmed, with Japanese bond relief also increasingly likely.

For hot AI computing power stocks, plunging rates/Treasury yields first improve the present value of future cash flows. AI infrastructure construction demands up-front investment in chips, servers, network, and power facilities—with returns coming later from cloud services revenue; the farther out the income, the more rate-sensitive. Previously, even when order and earnings forecasts were raised, reduced P/E multiples could offset gains. Now, if long-term rates stabilize and fall while profit forecasts continue to rise, stocks can enter an "earnings relay zone"—where price appreciation relies more on profit growth, supported by fading valuation headwinds.

JPMorgan’s recent bullish report provides industrial and valuation support for this view: the firm’s calculations show the Magnificent Seven’s forward P/E multiple relative to the market is near a decade low, while next-12-month semiconductor earnings forecasts have increased about 30% since June. The former reflects a marked contraction in relative valuation premium, the latter points to continued expansion of profit expectations. Together with falling rates, the market is shifting focus back to “can earnings upgrades persist”—another reason why semiconductors may benefit more than other tech segments lacking earnings improvements.

From the perspective of practical AI inference engineering, intelligent agent applications such as Muse and Astra push computational demands from “one-off answers” to “continuous task completion.” A task often includes planning, retrieval, tool use, code execution, and results verification, with retries and multi-agent collaboration possible. This expands accelerator computation, CPU orchestration, memory and context caching, persistent storage, and network data exchange needs, so AI infrastructure beneficiaries reach beyond GPUs to server CPUs, HBM and DRAM, enterprise SSDs, and high-speed interconnects. Multistep execution and tool chains are key traits distinguishing agent workloads from simple Q&A.

Declining rates may also improve data center project investment economics: as credit spreads remain stable, falling risk-free rates help lower new financing costs and raise project NPVs, making expansion plans near hurdle rates easier to implement. This produces a virtuous circle: more agent use drives compute demand, cost-of-capital relief aids project feasibility, and improved delivery and utilization translate to increased revenue and profit.

The JPMorgan report shows the Mag 7, which dominate US market benchmarks, may have largely completed their valuation adjustments, with profit growth poised to again support prices. JPMorgan notes the Magnificent Seven’s expected forward P/E versus the market is about one standard deviation below the historical median, at a decade low.

Apple, Microsoft, Google’s parent Alphabet, Amazon, Meta, Nvidia, and Tesla are both crucial in market cap indexes and global AI investment sentiment via AI chips/semiconductors, cloud computing, AI apps, and broad end-user exposure. Over $30 trillion in S&P 500 bull market capitalization gains through 2025 have been largely fueled by the seven tech giants and the broader AI computing power infrastructure supply chain. Thus, the earnings and valuations of the Magnificent Seven affect benchmark index performance, global equity market risk appetites, and AI compute chain growth outlooks.

The JPMorgan strategist team believes that as the bullish positioning in tech cools, profit growth stays strong, and valuations become more reasonable, tech stocks should regain some momentum lost since mid-year—they recommend re-engagement on pullbacks.

Tech stocks have still led the S&P 500 this year, but recent months’ rallies have cooled, with concerns that massive AI investment may not yield the returns optimists expect. Within tech, the US Magnificent Seven’s valuation is at a ten-year low, while semiconductors are just emerging from a tough patch—Anthropic’s Dario Amodei and OpenAI’s Sam Altman have both called for a coordinated slowdown in advanced AI development, adding to sector strains.

“We doubt there will ultimately be any material slowdown because the race is existential and winner-take-all,” wrote the JPMorgan equity strategy team led by Mislav Matejka. JPMorgan added that while the first-half rally is unlikely to repeat, significant opportunities still exist.

The Magnificent Seven’s decade-low valuation is not just JPMorgan’s view. Morgan Stanley Wealth Management’s Global Investment Committee notes the Mag 7’s premium over the other 493 stocks in the S&P 500 is now just 10%, a ten-year low, while their combined annual profit growth advantage remains about 45%.

Morgan Stanley Wealth Management CIO Lisa Shalett wrote in her report, “By comparison, we think these hyperscale cloud giants now look downright cheap.”