AI Stocks Rebound, Boosting US Indexes Amid Market Fluctuations

Wall Street indexes saw gains Monday, largely driven by a rebound in artificial intelligence stocks. The Nasdaq composite climbed 1.3% by midday Eastern time, fueled by strength in AI technology companies, while the S&P 500 rose 0.7% despite a majority of its constituent stocks declining. The Dow Jones Industrial Average, however, experienced a slight dip of 0.1%.

Recent weeks have seen significant volatility in AI stocks, with investors grappling with concerns that prices may have become overextended. Doubts are emerging about whether the substantial investments flowing into AI chips and data centers can translate into sufficient productivity and profit gains to justify the expenditures.

Among the day's advancers, Broadcom rose 3.8%, significantly contributing to the S&P 500's rise following announcements of long-term agreements to supply silicon products to Apple. This recovery comes after the company experienced losses exceeding 2% on both Wednesday and Thursday of the previous week.

Other AI-related companies also saw notable increases. Micron Technology climbed 3.5%, and Advanced Micro Devices jumped 9.2%.

Global AI Investment Test

The global investor appetite for artificial intelligence will face a further test later this week with SK Hynix, a South Korean memory chip maker, planning to raise approximately $28 billion through a stock offering in the United States. This offering is positioned to be one of the largest in U.S. history, surpassed only by SpaceX's recent IPO which raised $75 billion.

SK Hynix's stock in Seoul has already seen a more than threefold increase this year, attributed to the AI boom. However, the stock has experienced sharp daily declines in recent weeks, including a 14.6% drop on Thursday alone.

SpaceX, which operates the xAI business, has also witnessed stock fluctuations. In its last trading day before its scheduled inclusion in the Nasdaq 100 index, the company erased early gains to close down 0.7%. Its inclusion in the index will necessitate purchases by funds that track the Nasdaq 100, such as the QQQ exchange-traded fund.

In another development within the AI sector, TeraWulf saw a 12.3% increase after announcing a 20-year agreement with Anthropic to utilize its data center in Kentucky. TeraWulf projects this deal to generate around $19 billion in revenue. The company is currently shifting its business focus from bitcoin mining to high-performance computing.

Other Market Movements

In the oil market, prices remained relatively stable after OPEC+ announced Sunday that seven member nations intend to increase their combined oil production by 188,000 barrels per day in August. This marks the fifth consecutive month of agreed-upon output increases by OPEC+ members.

The price of Brent crude, the international benchmark, edged up by less than 0.1% to $72.13 per barrel. This level is close to pre-conflict prices in late February when tensions escalated following attacks on Iran by the United States and Israel.

Treasury yields held steady in the bond market, with the 10-year Treasury yield decreasing slightly to 4.48% from 4.49% recorded late Thursday.

A recent report indicated that growth in U.S. service businesses, including recreation and finance, aligned with economists' expectations last month. The survey by the Institute for Supply Management noted that some businesses are experiencing lower gasoline and diesel prices, which may ease inflationary pressures.

Internationally, stock indexes in Europe and Asia experienced modest declines. Hong Kong's Hang Seng index was an exception, rising 1.1%.