Stan Choe
Stocks in the artificial-intelligence industry are bouncing back on Wall Street and recovering some of their steep losses from last week, but the rest of the market and stocks worldwide are shaky.
The S&P 500 rose 0.5 per cent, coming off its worst week since June, and the Nasdaq composite rallied 1.1 per cent because it’s full of technology stocks. The majority of US stocks outside of AI and tech were falling, though, and the Dow Jones Industrial Average was mostly unchanged, in early afternoon trade, after swinging between earlier losses and gains.
The Australian sharemarket is set to retreat, with futures at 5.01am AEDT pointing to a loss of 74 points or 0.8 per cent, at the open. The ASX added 0.4 per cent on Tuesday. The Australian dollar was stronger at US69.81¢.
In Europe, the drops were sharp as many indexes sank more than 1 per cent, including 1.1 per cent in Paris. Those losses followed violent protests over the weekend that could force governments to increase their spending, which would put even more pressure on their bond markets. Yields cranked higher for European bonds.
AI stocks stood out amid all the cross currents, as they have for most of the past few years. A frenzy in spending for AI technology has forced them to the forefront of the market, sending them to record prices and driving indexes higher. Last week, AI stocks grabbed the spotlight after tumbling on worries about how expensive it has become to borrow money, which could threaten the boom.
Much of the spending on AI chips and data centres has come from borrowed money, and Treasury yields in the bond market have recently hit their highest levels in years or even decades. That raises the cost of borrowing money for everyone, from the US government to companies to households.
CoreWeave, a company that’s borrowed to buy AI chips that it rents out to customers over the cloud, has been at the centre of the market’s shifts. It rose 2.8 per cent Monday after tumbling 25.2 per cent last week.
Nvidia added 1.3 per cent and was one of the strongest forces lifting the S&P 500. Because it’s the largest stock on Wall Street by total market value, a 1 per cent move for its stock has more effect on the index than any other’s.
SpaceX, which controls the xAI business, rose 0.8 per cent to $US147.26. Its founder, Elon Musk, pledged on Monday to give one share of SpaceX to “every kid in America” next year. The offer came after Anthropic said over the weekend that it will commit 5 per cent of the shares in its highly anticipated initial public offering of stock to a new “public benefit” fund.
AI stocks rose ahead of some profit reports coming later in the week that could offer more details about the strength of AI-related spending.
Meta Platforms, which is pushing its Muse AI agent, will report its latest quarterly results on Wednesday. Lam Research, which supplies equipment and services for the making of semiconductors, will also talk about how its business is doing on Wednesday.
Expectations are high across the board for US companies’ profits from the summer. Analysts are forecasting overall growth of 29 per cent for companies in the S&P 500 from the prior summer, according to FactSet. Those high expectations are what has allowed the US stock market to run to records despite worries about war, high inflation and pressure from the bond market.
Cleveland-Cliffs rallied 15.8 per cent after the steel company reported a bigger profit for the latest quarter than analysts expected. CEO Lourenco Goncalves said it was the strongest quarter for the company in three years and that the outlook for profit in 2027 “has improved materially” from three months ago.
In stock markets abroad, the rebound for AI stocks helped South Korea’s Kospi jump 1.8 per cent to recover some of its 14.5 per cent drop from last week. It is dominated by two huge players in the AI industry, Samsung Electronics and SK Hynix, which has made it much jumpier than other markets.
In Europe, bond yields climbed following mass protests against the rising cost of living and poor school conditions. The protests could put pressure on governments to boost their spending to offer help, but that would likely only add to their already big piles of debt.
Yields rose for French bonds on worries about the government’s already strained budget and climbed much more than yields for Germany, which investors have historically seen as a safer bet.
In the US bond market, yields gained ground as the yield on the 10-year Treasury climbed to 5.14 per cent from 5.09 per cent late Friday. It topped 5.30 per cent earlier this month and touched its highest level since 2002.
Oil prices wavered. Brent crude, the international standard, rose 0.2 per cent to $US110.12 per barrel. It had been falling earlier in the day and has been yo-yoing between $US97 and $US110 this month on uncertainty about when the war with Iran will allow the energy industry to return to normal.
AP
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