Dow Jones futures surge as easing geopolitical risks, AI earnings revive market sentiment
- US index futures jumped after President Trump signaled reduced likelihood of further military action against Iran.
- CoreWeave’s strong quarterly beats and Anthropic’s potential debut fueled renewed optimism across the AI sector.
- The pre-market rebound follows Tuesday’s losses driven by heightened CPI-linked Federal Reserve rate hike expectations.
Dow Jones futures gain 0.16% to trade around 52,400 during the European hours on Wednesday. Meanwhile, S&P 500 futures advance 0.60% to trade around 7,590 and Nasdaq 100 futures rise 1.45% to trade around 28,230.
US stock futures surged as risk appetite returned to the market, driven by signs of easing geopolitical friction. US President Donald Trump indicated that further military action against Iran may no longer be required, a stance supported by US Secretary of State Marco Rubio at the G7 summit. At the same time, Congressional Democrats are planning to use the approaching government funding deadline as leverage to steer the administration toward a diplomatic resolution.
Market sentiment gained momentum from strong financial results delivered by AI computing provider CoreWeave, which rekindled enthusiasm for the broader artificial intelligence sector. CoreWeave shares jumped nearly 8% in after-hours trading after the company delivered beat-and-raise quarterly earnings, underscoring resilient demand for AI infrastructure. Confidence in the space was also reinforced by reports that Anthropic could make its market debut as soon as next week, aiming to raise up to $90 billion at a diluted valuation near $1.4 trillion.
This rebound follows a weak session on Wall Street on Tuesday, where the Dow Jones dropped 0.35%, the S&P 500 shed 0.38%, and the Nasdaq Composite fell 0.74%. US equities came under pressure after the latest CPI release solidified expectations for a Federal Reserve rate hike in December, with the CME FedWatch tool suggesting 85% odds of a rate increase in December.
US core inflation print surprises to the upside in October
Societe Generale’s Jan Groen highlights that the latest US inflation data came in firmer than anticipated, noting that “October core CPI surprised to the upside at 0.3% m/m.” He points out that this stronger core reading underscores lingering underlying price pressures, even as markets look ahead to the corresponding PCE data for a fuller assessment of the inflation trend.
AI stocks FAQs
First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.
There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.
Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.
Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.
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