Chip stocks jump 3.6% as AI spending takes centre stage before $10tn tech earnings
A renewed burst of enthusiasm for artificial intelligence pushed a closely watched gauge of chipmakers up 3.6% on Tuesday, leading a technology rally as investors positioned themselves for earnings from three companies worth more than US$10 trillion combined.
The Nasdaq 100 added 1.3%. Meta Platforms' US$25 billion share sale ended five times oversubscribed, and Oracle said it was expanding a partnership with OpenAI. Alphabet, Microsoft and Amazon are all expected to report healthy growth this week, but for Wall Street the figures that matter are how much they are spending on AI and when that investment will pay off meaningfully.
Not every large technology company should be judged alike on growth, said Chris Brigati of SWBC. "The period of a rising market lifting all stocks has started to shift," he said. "Future expectations are more focused upon execution risk and how much future success is already embedded in the current stock price."
Elsewhere, United Parcel Service climbed on a solid outlook, while Boeing fell 11% after cutting its delivery target. Brent crude settled below US$114 as traders weighed moves to de-escalate tensions in the Persian Gulf. Bonds barely moved and the dollar rose.
Attention now turns to the Federal Reserve, which is expected to hold rates steady on Wednesday. Chair Kevin Warsh, who has avoided guidance on future moves, faces a difficult post-meeting press conference: he is unlikely to offer much on December but may not want to push market bets away from the current expectation of a hike. Jerry Tempelman of Mutual of America Capital Management said the data give no good reason to delay tightening, but having signalled a wait until December, the Fed has "boxed itself in". James McCann of Edward Jones expects an increase at the end of the year, with one more in 2027 as the central bank combats inflation.
