Stocks moved higher on Wednesday to recover from a tech-led sell-off as investors awaited earnings from Nvidia (NVDA) that will set the tone for the next leg of the AI trade.
The Nasdaq Composite (^IXIC) climbed 1.4%, while the S&P 500 (^GSPC) put on nearly 0.9%. The Dow Jones Industrial Average (^DJI), which includes fewer tech names, added 0.2%. The moves came on the heels of run of sharp losses for stocks.
Investors are bracing for Nvidia’s third-quarter earnings due after Wednesday’s close, which are expected to swing the stock up to 7% in either direction. More broadly, the chipmaking giant’s results could prove a make-or-break moment for this year’s strong S&P 500 (^GSPC) rally, which has been spurred by optimism for AI-fueled growth.
Concerns about Big Tech’s massive spending on the AI buildout have fed into multiday declines, as high-profile investors offload holdings. Unease is growing that the likes of Amazon (AMZN) are stepping up their borrowing to fund AI ambitions just as the Federal Reserve looks set to put the brakes on interest rate cuts.
Given that, Fed minutes set for release later will be put under the microscope for insight into the economy and future policy. While that meeting delivered a rate cut despite division at the Fed, traders are now evenly split on whether the central bank will ease again in December.
That view could shift on Thursday, when the market gets the September jobs report — the first major data release since the government shutdown delayed economic updates.
With fresh data still sparse, big-box retailer earnings on Wednesday could offer the clearest read on the state of US consumer spending heading into the holiday season. Target (TGT) cut its earnings outlook and flagged a weak holiday season, while Lowe’s (LOW) posted upbeat sales.
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Nasdaq whips higher as Big Tech sees gains
The Nasdaq Composite (^IXIC) shot up 1.4% in mid-morning trading as investors piled back into riskier bets ahead of AI chip giant Nvidia’s (NVDA) highly anticipated earnings report.
The gain comes after two days of losses for the index, over which tech stocks sold off amid investor fears that the AI bubble could soon burst.
Big Tech stocks were mixed, with some big gains for several names in the group. Alphabet (GOOG) and Broadcom (AVGO) led gains for the group, with both stocks up more than 5%. Nvidia (NVDA) climbed over 3%, while Tesla (TSLA) added almost 2%.
Microsoft (MSFT) and Amazon (AMZN) — which were downgraded to Neutral from Buy by investment firm Rothschild & Co Redburn’s analyst Alex Haissl on Tuesday — saw shares fall modestly.
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Meta’s AI data center partner Blue Owl Capital sees shares rises after cancelling fund merger
Blue Owl Capital (OWL) — the asset manager whose splashy $27 billion deal with Meta (META) will help the tech giant develop a massive AI data center in Louisiana — saw shares of its publicly traded fund, OBDC (OBDC), rise nearly 3% Wednesday.
The move comes after Blue Owl reportedly canceled a merger between OBDC and its non-traded fund OBDC II. OBDC II investors would have lost money from the deal because they were restricted from redeeming shares until it closed, and OBDC has been trading at a discount — the publicly traded fund is down 20% for the year and 4% in the past month alone.
Blue Owl Capital has made headlines recently for its role in the AI buildout.
Investors have grown concerned over the emergence of off-balance sheet financing for AI projects through arrangements such as Meta’s and Blue Owl’s joint venture. In other words, Meta gets to use debt tied to Blue Owl through their venture to fund its Louisiana data center without that debt sitting on its balance sheet and weighing on earnings.
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Premarket trending tickers: Lowe’s, DoorDash, and MP Materials
Lowe’s (LOW) stock rose 4% before the bell after beating Wall Street estimates on quarterly sales. The retailer did, however, lower its full-year profit forecast amid growing economic uncertainty.
DoorDash (DASH) stock rose 3% before the bell following the news that Kroger will expand its partnerships with the online food ordering company.
MP Materials’ (MP) stock was up 4% in premarket trading on Thursday. The rare-earth company has seen some volatility over recent weeks due to export restrictions on rare earths from China. As part of the one-year trade truce, Beijing agreed to remove these restrictions; however, news has emerged that the details of that agreement have yet to be finalized between the US and China.
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