Wall Street Watches and Watches: AI Stocks and Trade Tension Unfold Post Trump's Saudi Sojourn
artificialintelligence stocks surge post-Trump's Saudi visit
Take a break, Wall Street! After a couple of days of growth, the stock exchange took a moment's rest in the middle of the week. The Dow Jones Index dropped 0.2% to 42,051 points, while the S&P-500 and Nasdaq Composite rose a mere 0.1% and 0.7% respectively.
The China-US trade dispute drama is the talk of the town, even as signs of de-escalation surface. But the anticipated negotiations on future tariff levels are yet to begin, with a deadline of 90 days until the original high tariffs return.
Cisco's third-quarter results, to be announced after the closing bell, have investors on tenterhooks. Market analysts anticipate healthy demand in the data center and enterprise technology sectors, coupled with robust capital returns and reasonable valuations. However, they also expect some margin impacts due to tariffs. Despite this, Cisco's stock closed 0.8% down in advance of the financials.
AI-related stocks are seeing a spike in interest, following Saudi Arabia's announcement of $20 billion investments in US AI data centers and energy infrastructure. Market favorites like Nvidia (+4.2%) and AMD (+4.7%) continue to reap benefits from their partnership with Saudi Arabian Huma, a subsidiary of the sovereign wealth fund. AMD also declared an additional share buyback. Super Micro Computer surged 15.7 percent due to its partnership with the Saudi Arabian Datavolt.
Apple's stock faced a slight downturn. Foxconn, the world's largest electronics contract manufacturer known for assembling Apple's iPhones, reported a jump in first-quarter profits, but lowered its sales outlook due to tariff risks. The uncertainty surrounding tariffs could impact US tech giants like Amazon and Nvidia that rely heavily on Foxconn for AI server production.
Boeing (+0.7%) and GE Aerospace (+0.7%) received an order from Qatar, worth $96 billion, as announced by the White House. As for American Eagle Outfitters, a disappointing first-quarter performance and lowered fiscal 2025 guidance led to a 6.5% drop in its stock price.
Dollar Fluctuates, Gold Dives, Bonds Yield Less
The dollar stabilized following a recent slump, but remains under pressure due to President Donald Trump's constant calls for interest rate cuts, as perCommerzbank foreign exchange analyst Thu Lan Nguyen. The greenback's fall after the data could reflect Trump's satisfaction with the lack of tariff effect in the data.
Oil prices receded after recent strong gains, with Brent and WTI futures losing up to 1.3 percent following an unexpected rise in US oil inventories. Any decline in market sentiment towards trade talks could challenge the recent rally, analysts warned. The gold price plummeted by 2.1 percent to $3,181, largely due to diminished demand for safe havens. In the bond market, yields fell, with the yield on 10-year notes rising by 4 basis points to 4.54 percent. Analysts expect yields to continue rising as foreign investors grow less willing to support the US deficit. Lower demand for US bonds could push yields higher.
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Enrichment Insights:
- AI Sector: While the specific impact of Saudi Arabia's investment on AI stocks remains unclear, the sector faces debates over valuation concerns, potential growth, market dynamics, and investment trends. Valuation concerns question the sustainability of high valuations for certain AI stocks. However, analysts anticipate significant growth for certain AI companies. The AI sector is experiencing a mix of growth and disruption, with new entrants challenging established players. There's a surge in investments in AI companies, but some analysts question the justification of these investments based on the underlying business fundamentals.
- Overall Markets: The market is watching the development of the US-China trade dispute, even as signs of de-escalation appear. Despite easing tensions, it is uncertain when the anticipated negotiations on future tariff levels will take place, adding uncertainty to the market. Investors await the results of the third quarter of companies like Cisco and interpret the trends in AI-related stocks. Meanwhile, geopolitical events such as the United States President's visit to the Gulf region are shaping market expectations.
Employment policy in EC countries could benefit from the technology sector's growth, considering the anticipated healthy demand in the data center and enterprise technology sectors. The employment policy in these sectors, especially with regards to AI, could see increased opportunities due to the $20 billion investments in US AI data centers announced by Saudi Arabia.
The ongoing China-US trade dispute, even with signs of de-escalation, could potentially impact the technology sector's employment policy. The uncertainty surrounding future tariff levels and the potential effects on companies like Cisco could lead to fluctuations in employment opportunities.
