Decoupling in the AI Era: Can Macroeconomic Fundamentals Predict NVIDIA Stock Returns?

Abstract

This paper investigates whether traditional macroeconomic fundamentals—specifically GDP growth and the 10-year Treasury yield—maintain their explanatory and predictive power for NVIDIA Corporation (NVDA) stock returns during the artificial intelligence (AI) era. Using quarterly data from 2011Q1 to 2024Q4, we pay particular attention to the structural break observed since early 2023, which coincides with the rapid advancement and widespread adoption of AI technologies. Our descriptive statistics reveal that NVDA's median quarterly return increased dramatically from 8.81% in the Pre-AI period to 25.3% during the AI Boom, while return volatility nearly doubled from 22.4% to 35.6%. Correlation analysis demonstrates that the relationship between GDP growth and NVDA returns shifted from near-zero correlation in the Pre-AI era to significantly negative during the AI Boom period. Furthermore, regression evidence indicates a complete reversal in interest rate sensitivity, with the 10-year Treasury yield exhibiting a negative effect on returns before 2023 but a strong positive association thereafter. A formal structural break test confirms parameter instability post-2023 with a Wald test p-value of 0.028. We conclude that AI-driven paradigm shifts substantially weaken traditional linkages between macroeconomic indicators and technology stock performance, with NVDA's returns increasingly determined by industry-specific factors including technological innovation cycles, semiconductor supply chain dynamics, AI ecosystem development, and capital expenditure patterns of major cloud computing providers rather than broad economic aggregates.