AI summary
Summary of article:
US stocks steadied after a surge in chip stocks on Friday, but next week’s inflation data and financial reports like Corewave will test the quality of the rebound. AI investments, data center construction and the possibility of Fed interest rate hikes are still the market’s focus.
The US stock market stabilized on Friday due to the rise in chip stocks and also next week.inflation Data and technology earnings will test whether the rebound can continue. Investors are still assessing the extent to which data center construction may slow, andfederal Reserve (Fed) The impact of further interest rate increases on AI investment and corporate profits.
The Dow Jones Industrial Average fell 237.33 points on Friday, while the S&P 500 and Nasdaq Composite rose 0.3% and 1.1%, respectively. However, the major indexes still closed in the black on a weekly basis, and the S&P suffered its biggest weekly decline since April 2025.
The Philadelphia Semiconductor Index rose 4.2% on Friday, and the TSMC ADR also rose 6.3%, but still fell 12.2% and 7.6%, respectively, on the week.
The focus is on the Consumer Price Index (CPI) for October, due to be released next Tuesday. Preliminary estimates compiled by FactSet suggest that the annual growth rate may increase from 3.7% to 3.9%, while the monthly growth rate of core prices may slow. Producer Price Index (PPI) will also be released next week.
The United States added 165,000 new jobs in October, more than the expected 59,000. According to LSEG data, the market currently expects about an 80% chance of the Fed raising interest rates in December. Strong employment is conducive to consumption and profits, but rising public bond yields will also raise investors’ requirements for AI investment returns, and companies will need to prove that spending can be converted into cash flow, eToro analysts noted.
CoreWeave, Applied Materials and Cisco will release financial reports next week, with CoreWeave getting the most attention. The market is concerned that restrictions on data center construction and financing costs will hamper the expansion of new cloud players. Garrett Melson, portfolio strategist at Lawson Investment Management, believes if CoreWave can explain how the construction project will be completed, it will help ease concerns.
Texas Governor-elect Hinojosa reiterated that the suspension of data center construction only applies to new applications for permits and is only implemented temporarily. Ajay Rajadhyaksha, global head of research at Barclays, believes this means construction should not be affected in 2027. Follow-up still depends on how states set rules and whether companies adjust construction schedules, spending and purchasing.
Barclays believes the election results are not enough to explain Thursday’s decline, and hedge funds that had bet on AI stocks were forced to reduce their bets, exacerbating the decline. Goldman Sachs’ trading department reported,US stocks The violent fall has increased the panic in the market to extreme levels. When such situations occurred in the past, there was often a strong rally in the medium term. As the pressure to sell the stock subsides, entry opportunities begin to emerge.
But the S&P recovered less than 10% of its losses on Friday. StoneX strategist Fawad Razakzada believes the rise is a product of short covering and bargain hunting, and concerns remain about AI regulation and spending.
Jay Woods, chief market strategist at Freedom Capital Markets, believes the market could still fall for several days or a week before breaking out of the bottom. He is optimistic about opportunities in Micron, NVIDIA and semiconductor stocks, but advocates buying small amounts first. Whether next week’s rebound can still be sustained depends on inflation, manufacturing progress and whether the technology industry can stick to its profit outlook.
Summary FAQ
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Chip stocks jumped strongly on Friday, leading the Nasdaq and S&P, but the weekly trend still closed well below that, suggesting they were just stopping their decline rather than getting stronger overall. The market generally believes that this wave of growth is akin to short covering and bargain hunting.
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The October CPI to be announced next Tuesday is highly anticipated. The market estimates that the annual growth rate may increase to 3.9%, and the PPI will also start simultaneously. If inflation remains high, expectations will strengthen that the Fed will raise interest rates again, which will depress valuations of technology stocks.
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The market is worried that a slowdown in data center construction and rising financing costs will hinder the expansion of new cloud companies. If CoreWeave can explain construction progress and funding arrangements, it would help ease concerns that AI spending is difficult to convert into cash flow.
