Global investors battle between long- and short-term wins amid Nvidia volatility

Global investors are bracing for a battle between long and short-term wins amid a dramatic sell-off in artificial intelligence-related stocks.

AI darling Nvidia buoyed an otherwise deflated market when it reported strong earnings after the bell on Wednesday, sending its own stock soaringand carrying related names alongside it. However, the rally quickly reversedon Thursdaywith Nvidiaultimately ending the trading session3%lower.

While the U.S. chipmaker’s earningsinitially appeared strongenough to quellconcerns over an AI bubble, economicspeculation putglobal investorsback on thedefensiveas hopes dimmed of a December rate cut by the Federal Reserve. The U.K.’shotlyanticipatedAutumn Budget is also expected next week.

Asia-Pacific markets fell Friday,led by techheavyweightSoftBank,whichplunged more than 10%.European stocksfollowed suitwith a negative open.Stateside,however,appetite may have already reversed– again – asfutures rose.

“I think the market is quite confused as to why this is happening,” OzanOzkural, founding managing partner at Tanto Capital Partners, told CNBC’s “Squawk Box Europe” on Friday.

Market moves this year have been driven by sentiment, momentum,AIand innovation, “with sprinkles of geopolitical risk,” he said. “Although we haven’t got a specific reason why there has been a sell-off on the back of the strong Nvidia results, to me it’s not that surprising, because [it’s] only a matter of time until sentiment just shifts, because we just live in a much more uncertain world.”

Therealsodoesn’tneed to be a catalyst, he added.However, the “most dangerous place we can be at” is a sustained sell-off, even ifit’sa slow burn,Ozkuralwarning, noting that this could lead portfolio managers to lock in gainsand cash out.

Asset managers are driven by compensation cycles whichiswhytheydon’tlike to hedge their bets, he said. “No one cares about the long term. Everyone is dead in the long term. No one even cares about the medium term.It’sall about short term cycles,” he said.

“But the reality is, it’s year end, people need to get paid their bonuses, and it doesn’t pay to be bearish unless we see a sustained level of a sell-off.”

Investors with cash in an AI ETF or index may be cashing outdue to a mixture ofyear-end risk management andcontinued concerns over an AIbubble.Those who may have made a lot of money on the back of the AI trade will probably want to step back and sell, said Stephen Yiu, investment chief at Blue Whale Growth Fund, which has a position in Nvidia.