Chip rebound lifts S&P 500 as AI trade returns on US election day

Chipmakers ended their slide and pulled the S&P 500 higher on US election day, even as most of the index's companies fell, in a session that turned on whether investors still trust the artificial-intelligence trade.

The rebound came after a selloff driven by worries that the AI spending boom is getting harder to justify. Advanced Micro Devices and Super Micro Computer added to the mood with strong forecasts in late trading. Treasuries did not join the rally, with solid job openings data keeping bonds under pressure, while the dollar rose and oil eased.

Voters went to the polls in races that will settle local issues and control of Congress, with the first polls closing at 6pm Eastern time. Ken Mahoney of Mahoney Asset Management called the vote "an anticipated volatility event" that markets would be glad to put behind them, and said the results could reshape the balance of power in Washington.

Tom Essaye of The Sevens Report noted that since 1950 the S&P 500 has never been lower 12 months after a midterm election. Angelo Kourkafas of Edward Jones said the results could act as a clearing event for some uncertainty, though AI and geopolitics remain the main forces driving markets into the final two months of the year.

The AI question is one of price rather than potential, according to Brian Therien of Edward Jones, who said the recent rotation was a reassessment of what investors will pay rather than a rejection of the technology. He kept an overweight call on equities, favouring US large and mid-caps. Apollo Global Management's president, Jim Zelter, said the asset manager would take a more defensive stance on its AI-linked investments: demand for chips will stay strong and AI capabilities are improving fast, he said, but how pricing and economics will evolve is unknown.