Goldman Sachs Head of Hedge Fund Business: Oil prices are more important than the Jackson Hole Fed meeting; Nvidia is the focus this week

The trend of oil prices, Nvidia’s earnings report, and the Federal Reserve annual meeting constitute the three main market variables this week—but according to Goldman Sachs, their weighting is not equal.

Rich Privorotsky, head of Goldman Sachs One-Delta Hedge Fund business, pointed out in his latest client report that for the broader stock market, oil prices are likely to be more important than the Jackson Hole meeting this week. He listed the latest actions by the U.S. Treasury Department regarding Iran sanctions as a market focus and warned that if the sanctions directly target Asian refiners, it could add new trade frictions. Meanwhile, Nvidia will release its earnings report on Wednesday, which Privorotsky characterizes as a “mixed catalyst.”

Market sentiment shifted noticeably last week. The Nasdaq continued to underperform the broader market, technology stocks saw large-scale selling, and the AI narrative is facing pressure for a revaluation. Privorotsky believes that price declines themselves are reinforcing the bearish narrative—“Price drives narrative; after a big enough drop, old arguments about price deflation, saturation, and competition suddenly start to sound very convincing.”

Oil Prices: The Most Direct Tool to Stabilize the Bond Market

Privorotsky places oil prices at the top of all risk variables for this week. His logic is clear: last week’s sharp rise in stagflation basket assets stemmed from the combination of rising energy prices and weakening economic growth.

“If the US really wants to stabilize the bond market, lowering energy prices might be the most practical path,” he wrote. He estimates that for every $10 drop in oil prices, inflation expectations would improve, consumer confidence would increase, long-term yields would fall, and the stock market would be supported.

In his view, aside from the vertical surge in AI capital expenditures, the macro fundamentals are not optimistic—the labor market is weakening, consumer performance is mediocre, and the fiscal and inventory tailwinds are fading. Even so, over $1 trillion in annual AI infrastructure investment still supports nominal GDP.

Nvidia: Concerns Beyond Strong Demand

Nvidia’s earnings report on Wednesday is set to be the most watched event for the tech sector this week. Privorotsky expects the demand data to be “absurdly strong,” with sizeable revenues.

However, he has reservations about two issues. First, Nvidia is increasingly being seen by the market as the “central bank of AI,” and the scale of financing commitments around its ecosystem is drawing attention. The second issue is memory costs—if costs continue rising, will Nvidia choose to absorb them, pass them downstream, or reduce memory dependency through engineering? “This is crucial for trading the memory sector.”

There are already signs of broader pressure on the AI/semiconductor sector. Last week, the free frontier model Ox Alpha, whose developers remain anonymous, drew market attention; following that, OpenAI lowered the API pricing for GPT-5.6 Sol. The Silicon Data LLM Token Spending Index (SDLLMTK Index) has fallen nearly 40% since the end of June.

Privorotsky points out, so far no company has said it will cut hardware spending, but stock valuations have already been actively compressed. Broadcom completed $60 billion in debt financing last week, and the scale of debt issuance needed for AI buildout is starting to concern the market—“If you assign any non-zero probability to the scenario ‘companies ultimately can’t finance all their plans,’ then the answer is either more equity dilution or capex cuts, and neither supports higher valuation multiples.”

Jackson Hole: Limited Event Risk

The main highlight of the Jackson Hole meeting will arrive on Friday with Waller’s keynote speech. Privorotsky assesses the event risk for this meeting as low.

He expects that the July PCE data due Wednesday will roughly meet expectations, with the core PCE month-over-month around 20 basis points, in line with consensus.

As for Waller’s speech, he believes that since the Federal Reserve has clearly shifted toward de-emphasizing forward guidance, unless Waller deviates sharply from his usual stance, it is unlikely to have major market impact. “Most people expect a neutral tone, with a slight hawkish tail risk—though it’s unclear how that will manifest, maybe in statements regarding the balance sheet.”

Fiscal Intervention: More Symbolic Than Substantive

Last week, the core market theme remained interest rates. The effectiveness of market intervention by Treasury Secretary Bessent has faded, but yields remain below pre-intervention levels.

Privorotsky believes the symbolic significance of this intervention is more profound for the dollar and gold. “It solidified an interventionist path, rather than truly solving the underlying fiscal imbalance.” He attributes the rise in long-term inflation swaps/breakeven rates and the outperformance of precious metals to the market pricing this judgment.

Within this framework, Privorotsky maintains his core allocation view: go long financials and industrials, hold nominal assets, and assume a significant deficit reduction remains unlikely. “A combination of S&P + gold still makes sense,” he wrote. For bonds, he leans bearish but prefers to wait for better technical entry points at month-end.

Regarding the semiconductor sector, his assessment is: valuations will eventually provide support, but until earnings growth catches up to current multiples—a process that could accelerate as investors look to 2027 earnings forecasts—he sees little momentum for the sector to continuously break new highs.