The Nasdaq Composite notched a new all-time high during a broad-based rally on Monday, as markets focused on upside for the artificial intelligence (AI) revolution. Amid another uptick for yields across the Treasury spectrum, investors, traders and speculators are placing more weight on the potential for AI to increase efficiencies over the long term, even as it drives up costs in the short term.
The 2-year Treasury yield ticked down 0.4 basis points to 4.821%, while the 10-year Treasury yield (3.2 bps, 5.309%) and the 30-year Treasury yield (3.4 bps, 5.664%) reached new 52-week highs again, as a global bond market sell-off continues.
Still, at the closing bell, the tech-heavy Nasdaq Composite was up 1.1% to 27,477, a new all-time closing high. The broad-based S&P 500 had added 0.7% at 7,773, and the blue-chip Dow Jones Industrial Average was up 0.2% to 51,267.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
“There is no doubt that the U.S. remains an oasis and is the engine behind global GDP growth,” Louis Navellier of Navellier & Associates writes. As Navellier explains, “FactSet is estimating that the S&P 500’s third-quarter earnings are forecast to rise 29.5%.”
We are indeed in historic territory, as analysts at the Well Fargo Investment Institute note. “Consensus for 2027 capex for the eight-largest cloud computing companies is now approximately $1.3 trillion,” they write. “This would represent approximately 3.7% of our nominal gross domestic product forecast for next year, putting this investment cycle on par with some of the largest in U.S. history.”
Comparable cycles include the railroads from 1879 to 1890, which accounted for more than 4% of GDP, electric power in 1929, oil and gas in 1980 and the dot-com boom in 2000.
Services surveys say the economy is still expanding
The Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI) printed at 54.9% in September, down from a reading of 55.4% in August and below a consensus forecast of 55.1%.
But, as William Blair economist Richard de Chazal says, it’s the 27th consecutive month the index has been above the 50% expansion-contraction line. And, in the aftermath of a cooler-than-expected September jobs report, the survey confirms that “services sector employment, which accounts for the bulk of economic activity, remains on firm footing.”
Looking for more timely stock market news to help gauge the health of your portfolio? Sign up for Closing Bell, our free newsletter that’s delivered straight to your inbox at the close of each trading day.
As Chazal notes, the employment index returned to expansion for the first time in three months. Still, although crude oil traffic through the Strait of Hormuz is recovering, fuel shipments are still well below prewar levels, and diesel, gasoline and petroleum products helped push the prices index to its highest level since July 2022.
“The bigger pressure remains on costs,” Chazal writes. “For the Fed, the report suggests inflation remains the main concern. Friday’s jobs data lowered the odds of a hike at the October meeting, but with demand holding firm and input costs still climbing, another hike remains likely.”
INTC hit by Elon’s TerraFab strategy
Nvidia (NVDA, +2.1%) hit another new all-time high and was among the top two Dow Jones stock on Monday, helped by optimism about the AI trade, as well as the impact of announcing the biggest stock buyback in market history last week.
But fellow semiconductor stock Intel (INTC, -2.6%) was down after Elon Musk confirmed that Taiwan Semiconductor Manufacturing (TSM, +2.8%) is talking with his TeraFab chipmaking project about its facilities in Texas.
“Just discussions, but something may come of it,” the CEO of SpaceX (SPCX, +7.6%) and Tesla (TSLA, +2.2% responded on X to reports of the TeraFab-TSMC talks.
Intel has an existing deal with TeraFab. Musk clarified in a follow-up post that TSMC could work with rather than replace Intel at his chipmaking plant.
Intel also has a partnership with Alphabet (GOOGL, +0.9%) to support Google’s AI cloud infrastructure, and the chipmaker also received $5 billion from Nvidia as part of a project to co-develop custom chips.
CBRS looks a little better today
Cerebras Systems (CBRS, +9.1%) has had a tough go of it since the tech stock completed its initial public offering (IPO) in May, generating a loss of more than 4% vs a gain of more than 10% for the S&P 500.
But the AI infrastructure firm also got a boost from a post on X. “Cerebras is a close partner,” Open AI CEO Sam Altman said late Friday, “and we have a deep engagement pushing on the frontiers of speed.”
OpenAI is Cerebras’ biggest customer by revenue backlog. In January, the companies signed a $10 billion deal to provide ChatGPT with 750 megawatts of computing power through 2028.
At the same time, research firm SemiAnalysis reported that OpenAI is using Nvidia’s hardware rather than Cerebras’s to support “Ultrafast” mode for its latest model.