[New York Stock Market Briefing] AI tech shares draw bargain hunting, lifting markets together… Dow sets another record high

All three major U.S. stock indexes closed higher. As bargain hunting flowed into artificial intelligence (AI) tech shares, the Dow Jones Industrial Average notched a fresh all-time high.

On the 9th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average rose 20.20 points (0.04%) from the previous session to close at 50,135.87. The Standard & Poor’s (S&P) 500 gained 32.52 points (0.47%) to 6,964.82, while the Nasdaq Composite, weighted toward tech stocks, jumped 207.46 points (0.90%) to finish at 23,238.67.

The Dow set new all-time highs on both an intraday and closing basis. Traditional industrial names that had led the Dow last week were largely in a pause. Caterpillar, a symbol of U.S. manufacturing, climbed 2.19%, but blue chips such as Walmart, JPMorgan Chase, Visa, Procter & Gamble, Coca-Cola, Amgen, and Walt Disney saw pullbacks of around 1–2%.

Still, Microsoft, which had slipped below a $3 trillion market cap last week, surged more than 3%, driving both the Dow and the Nasdaq. Powered by bargain buying, Microsoft reclaimed the $3 trillion market-cap level.

Nvidia also rose 2.4%, lifting its market value back above the $4.6 trillion level. With semiconductor shares still signaling solid demand, the Philadelphia Semiconductor Index advanced 1.42%. After a 5.7% jump on last week’s final trading day, the index extended its rally without taking a breather.

Oracle soared 9.6%. Last week, Oracle had slid to a level down as much as 60% from its peak in September last year. Investor skepticism had grown over its debt-heavy approach to building AI infrastructure, but perceptions of an oversold drop appear to have spurred bargain hunting.

As bargain buying in tech continued for a second straight day, megacap tech companies with market values above $1 trillion also rose across the board, except for Apple and Amazon.

Another notable development is the outperformance of legacy tech firms. Amid a shift toward blue chips rather than the AI theme, IBM was shown to be trading at a higher multiple than Microsoft on a 12-month forward price-to-earnings (P/E) basis. IBM was once labeled “dead money,” but it is drawing expectations in quantum computing.

Sam Stovall, chief investment strategist at CFRA Research, said, “Investors keep asking themselves whether the rebound will continue even after a tremendous rally,” adding, “Over the past five years, tech’s 12-month forward P/E carried a 17% premium to the market average, but it is now at an 8% discount, which is a pretty good figure.”

Software stocks, which had been plunging on fears that AI would encroach on their business domains, also rose for a second consecutive session. The Dow Jones U.S. Software Industry Index climbed 3.3%. The index has fallen for four straight months through this month and remains down about 30% from its peak, suggesting some contrarian buying has flowed in.

In a report released the day, Jefferies said, “Investor sentiment toward the software sector has reached lows last seen during the dot-com bubble and the global financial crisis, but even in an AI transition, incumbent software companies that control data and workflows are likely to be the ultimate winners,” adding, “We remain Underweight on application software, but maintain our Overweight view on infrastructure software.”

According to the CME FedWatch Tool from the Chicago Mercantile Exchange (CME), the fed funds futures market priced in an 82.3% probability that rates will be left unchanged next month.

The Cboe Volatility Index (VIX) fell 0.40 points (2.25%) from the previous session to 17.36.

Ko Jeong-sam, Hankyung.com reporter jsk@hankyung.com