(July 7): A rally in several technology giants lifted stocks amid speculation that the artificial-intelligence trade that has powered the bull market has more room to run.
The advance halted a back-to-back selloff in chipmakers, with the Nasdaq 100 climbing 1.3%. Nvidia Corp. said “our road map is intact” after a report on a server delay jolted tech shares in Asia. Broadcom Inc. jumped as it’s extending a partnership with Apple Inc. to 2031. SK Hynix Inc. kicked off the formal marketing process for its US listing. Meantime, global investors geared up for Samsung Electronics Co.’s earnings on Tuesday.
A wild ride for tech stocks in recent weeks has left investors looking for fresh validation of the AI trade. While semiconductor shares just wrapped up their best quarter on record, volatility has intensified amid questions over rising competition, potential overcapacity and the payoff from massive investments.
The debate over whether AI exuberance is overdone is less about today’s valuations than whether future earnings can remain at extraordinary levels, according to BlackRock Investment Institute’s team led by Jean Boivin.
“Are we in an AI bubble? We think the answer depends on whether AI can turn today’s scarcity into tomorrow’s abundance,” BII wrote. “Markets are increasingly pricing that outcome, expecting AI to lift productivity and growth enough to sustain today’s extraordinary earnings.”
Whether those earnings can endure – not where valuations sit relative to history – is key, BII said. Still-elevated margins suggest they can, it noted.
See also: Tech stocks rebound as dip buyers pounce on chip pullback
“This week, investors will look for signs that tech’s recent volatility is stabilizing,” said Mark Haefele at UBS Chief Investment Office. “Markets will also assess whether recent pressure on hyperscaler shares changes the perceived path for AI capital expenditure.”
Signs that spending plans remain intact would help reassure investors that demand for AI infrastructure remains durable, Haefele said. Conversely, further evidence of caution could keep attention focused on valuations, financing needs, and concentration risk.
Elsewhere, shorter-term Treasuries edged higher as traders see the Federal Reserve as less likely to raise interest rates following last week’s weaker-than-expected jobs report. Data Monday showed the US service sector expanded in June at a slightly slower pace, but firms boosted payrolls as cost pressures eased.
See also: Dow average hits peak as jobs ease Fed-hike worry
Oil settled at the lowest since late February as Saudi Arabia made the biggest cut to its flagship crude prices in at least 26 years, the latest sign of a glut in global markets.
What Bloomberg strategists say...
“US equities are poised to grind higher in a week with few catalysts as AI-hardware names get a relief bounce.”—Michael Ball, Macro Strategist, Markets Live.
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.7% as of 4 p.m. New York time
- The Nasdaq 100 rose 1.3%
- The Dow Jones Industrial Average rose 0.3%
- The MSCI World Index rose 0.5%
Currencies
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- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1442
- The British pound rose 0.3% to US$1.3392
- The Japanese yen fell 0.4% to 162.03 per dollar
Cryptocurrencies
- Bitcoin rose 1.4% to US$63,571.13
- Ether rose 0.7% to US$1,787.94
Bonds
- The yield on 10-year Treasuries declined two basis points to 4.47%
- Germany’s 10-year yield advanced one basis point to 2.95%
- Britain’s 10-year yield advanced one basis point to 4.79%
Commodities
- West Texas Intermediate crude was little changed
- Spot gold fell 0.4% to US$4,162.19 an ounce
Uploaded by Jason Ng
