Wall Street is once again setting records, driven by the burgeoning excitement surrounding the artificial intelligence (AI) sector. On Monday, the S&P 500 rose by 0.4%, reaching an unprecedented high. Meanwhile, the Dow Jones Industrial Average experienced a slight dip of 63 points, or 0.1%, and the Nasdaq composite climbed 0.7% to achieve its own record.
The Australian share market is poised for a positive start, with futures at 5:06 AM AEDT indicating a gain of 24 points, or 0.3%, at the opening bell. This follows a slight decline in the ASX on Monday. As of 5:15 AM AEDT, the Australian dollar was trading at US66.17¢.
AI Stocks Drive Market Gains
Advanced Micro Devices (AMD) emerged as a market leader, soaring 23.7% after announcing a significant deal with OpenAI. This agreement will see OpenAI utilizing AMD’s chips to power its AI infrastructure. Notably, OpenAI could acquire up to 160 million shares of AMD if certain milestones are achieved.
“A frenzy around AI has been one of the main reasons Wall Street has been hitting record after record, though that’s also raising worries that prices have potentially shot too high.”
OpenAI’s rapid growth into a $500 billion company has been a major catalyst for the AI sector’s momentum. The company has been actively forging partnerships worldwide to expand its AI infrastructure capabilities.
Nvidia, another key player in the chip industry, recently announced a $100 billion investment in OpenAI as part of a partnership, sparking criticism that the AI investment landscape is becoming insular. Following AMD’s announcement, Nvidia’s stock slipped by 1.1%, impacting the S&P 500 due to its status as the most valuable stock on Wall Street.
Broader Market Movements
Beyond the tech sector, Comerica saw a 13.7% increase in its stock price after Fifth Third Bancorp agreed to acquire it in an all-stock transaction valued at $10.9 billion. This merger would create the ninth-largest bank in the United States. Conversely, Fifth Third’s stock fell by 1.4%.
Tesla’s shares rose by 5.4% following social media posts hinting at a potential product unveiling scheduled for Tuesday. Meanwhile, Verizon Communications experienced a 5.1% decline after announcing a change in leadership, with Dan Schulman, a former PayPal CEO and current director at Verizon, taking over as CEO.
Elsewhere on Wall Street, trading remained relatively subdued as the market largely overlooked the ongoing US government shutdown. Historically, such closures have had minimal impact on the stock market or the broader economy, and current sentiment suggests a similar outcome this time.
“All told, the S&P 500 rose 24.49 points to 6,740.28. The Dow Jones Industrial Average fell 63.31 to 46,694.97, and the Nasdaq composite rose 161.16 to 22,941.67.”
Global Market Reactions
Internationally, political developments are exerting a more pronounced influence on stock markets. In Japan, the Nikkei 225 surged by 4.8% after the Liberal Democratic Party appointed Sanae Takaichi as its leader. Takaichi, an ally of the late Prime Minister Shinzo Abe, is expected to continue policies favorable to investors, such as lower interest rates.
The yen’s depreciation against the US dollar, driven by expectations of increased government spending under Takaichi, has bolstered Japanese exporters, making their products more competitive globally.
Neil Newman, head of strategy at Astris Advisory Japan, remarked, “Obviously, investors like what she has been saying and certainly today judging by the number of stocks that moved and which stocks moved, it seems like pretty much led by foreigners so far.”
In contrast, France’s CAC 40 index fell by 1.4% following the resignation of the country’s newly appointed prime minister, Sébastien Lecornu. His abrupt departure, just a day after forming his government, has intensified political instability in France, which has been grappling with a fragmented legislature since President Emmanuel Macron’s snap elections last year.
Looking Ahead
In the bond market, the yield on the 10-year Treasury note rose to 4.16% from 4.13% late Friday. The US government shutdown is expected to delay several economic reports scheduled for this week. However, investors will have access to earnings reports from major companies like Delta Air Lines, PepsiCo, and Levi Strauss.
Despite the shutdown, the Federal Reserve is set to release minutes from its recent meeting, during which it cut its benchmark interest rate for the first time this year. Market participants are closely watching for indications that the Fed will continue to lower rates throughout the year and into the next.
