Wall Street's AI Bets Drive Market Whiplash

Technology shares rebounded Monday after the previous week’s selloff, lifting the S&P 500 and Nasdaq while the Dow slipped and Treasury yields rose. The swing followed worries that companies were borrowing too heavily to build artificial-intelligence infrastructure. Those bets, made by companies and investors with power over vast pools of capital, helped set the day’s terms for everyone watching market numbers.

The S&P 500 gained 31.29 points, or 0.41%, to 7,690.73. The Nasdaq Composite jumped 290.85 points, or 1.11%, to 26,430.89. The Dow Jones Industrial Average fell 36.38 points, or 0.07%, to 51,966.03. Not every index joined the rebound.

The AI trade sets the terms

Chip stocks led the technology rally, posting their first gain in nine sessions. Nvidia rose 1.4%, Tesla gained 3.8% and Alphabet advanced about 1%. Investors returned to technology and AI-related stocks after the previous week’s sharp selloff, when concerns grew that companies were borrowing too heavily to fund AI infrastructure.

Traders also pared bets that CoreWeave and other technology firms pursuing the AI boom had overextended themselves. Their attention turned to upcoming AI earnings. The fortunes of these firms and the investors financing them shifted with expectations about borrowing, growth and profits; the daily rebound offered no account of any community response or mutual aid outside those financial actors.

CoreWeave, described as a so-called neocloud company, fell more than 25% the previous week. Goldman Sachs upgraded it to buy, but early gains faded and the stock closed slightly lower. The company’s shares hit a 52-week low during Monday’s trading.

Its bond yields remained high, and its five-year credit default swaps stood at distressed levels. Yields on Oracle debt also stayed elevated as credit concerns persisted across AI-related stocks. The upgrade didn’t erase those concerns. Investors were left weighing the risks of borrowing behind the AI boom.

Money moves, and the cost follows

The technology rebound pushed Treasury yields higher after worries about the AI trade had sent investors toward government bonds the previous week. The benchmark 10-year Treasury note recorded its biggest yield gain in nearly two weeks. Money shifted direction as market expectations changed; the article describes that movement through investor decisions and financial-asset prices, not through any say for people outside those decisions.

Jose Torres, senior economist at Interactive Brokers, wrote: “Improving moods regarding the prospects of modern technology have Wall Street breathing a sigh of relief as participants drop hedges, after the cost of volatility protection soared intraday on Friday, ahead of the intensifying selloff.” The relief belongs to the market participants he describes. Their hedges and moods can turn quickly.

More numbers, more decisions from above

In early Tuesday trading, Nasdaq-100 futures rose 0.2% after the index gained 1.2%, while the Philadelphia Semiconductor Index climbed 1.6%, ending an eight-day losing streak. S&P 500 futures added 0.1%, and Dow futures traded 56 points higher, or 0.1%. Nasdaq-100 futures were also reported up 0.2%.

Futures for Japan, South Korea and Australia pointed lower, while Hong Kong traders were set to return from a holiday. Investors were due to assess corporate earnings Tuesday. United Airlines was scheduled to report after the bell, and General Motors before the open. About 70 S&P 500 companies were set to report during the week. Housing starts and pending home sales figures were also scheduled for release Tuesday.

The reported activity centers on corporate earnings, credit and investor bets. It offers no account of grassroots organizing or direct action, and no electoral or legislative response. Instead, the next market-moving decisions awaited company reports and economic figures, while companies’ borrowing risks remained in view.