U.S. stocks rose on Monday after an artificial intelligence sell-off produced Wall Street's worst week since late June. Worries about Chinese competition and debt-fueled financing hit AI names, while a wave of quarterly earnings reports now takes center stage.
U.S. stocks marched higher on Monday, bouncing back after a steep sell-off in the AI trade led to Wall Street's worst weekly performance since late June. At 14:16 ET, the benchmark S&P 500 climbed 0.6% to 7,705.00 points. The tech-heavy Nasdaq Composite surged 1.2% to 26,465.76 points.
The Dow Jones Industrial Average inched up 0.1% to 52,062.06 points. Investors are now turning their attention to a deluge of quarterly earnings reports that begin this week.
Memory chipmakers and neoclouds tumble in the AI sell-off
The selling began after reports of advances made by China's ChangXin Memory Technologies. Micron Technology slumped 14.6% for the week, while Samsung Electronics and SK Hynix tumbled 17.8% and 24.3%, respectively.
Then shares of so-called neocloud firms came under pressure. A Gartner report predicted that by 2030, 80% of neocloud providers were expected to cease independent operations. CoreWeave, the biggest neocloud, dropped more than 25% last week, also partly due to a rout in its bonds, and peer Nebius also fell more than 25%.
Chip stocks were among the hardest hit. The Philadelphia Semiconductor Index notched an eight-session losing streak on Friday, its longest such run since October 2008.
Debt financing draws a warning
Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management, said the sell-off in CoreWeave's bonds signaled that lenders were "demanding substantially greater compensation for the risk of financing the AI buildout." He added that the current AI buildout is increasingly financed through debt and equity issuance rather than the free cash flow of a narrow group of companies.
Reports of slowing revenue growth at Anthropic also clouded the mood last week.
Earnings calendar starts with SpaceX and Netflix
The Q3 earnings reports will pick up steam going into the first half of November. SpaceX reports its second quarterly update as a public company on Tuesday, alongside Netflix, while Meta Platforms and Tesla report on Wednesday.
Source: Investing.com
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