Wall Street Rebounds Despite Inflation Setback as AI Chip Stocks Lead Gains

Dow rises 1% as all three major indexes rebound

Falling Treasury yields ease pressure from tighter policy

Semiconductor stocks gain on optimism over AI spending

U.S. stocks rebounded despite an unfavorable inflation reading. Falling Treasury yields eased rate pressure on investors, while expectations that AI spending will boost corporate earnings helped drive buying.

On Oct. 15, the Dow Jones Industrial Average closed at 52,177.69, up 556.21 points, or 1.08%, from the previous session. The S&P 500 rose 25.12 points, or 0.33%, to 7,744.06. The Nasdaq Composite added 20.16 points, or 0.08%, to 26,713.03, finishing marginally higher.

The inflation report was not supportive for equities. The producer price index for September rose 1.3% from a month earlier, far above expectations. Even so, interest-rate futures markets still favored the view that the Federal Reserve would keep its benchmark rate unchanged this month. CME FedWatch showed the probability of an October rate increase at about 27%.

In the bond market, yields fell sharply instead. The 10-year Treasury yield dropped to 5.086%, according to Tradeweb data. That marked the biggest one-day decline since Aug. 1. The move was attributed to a shift into safe-haven Treasuries as investors worried about borrowing costs for AI companies. Bond yields fall when prices rise.

Despite broader concerns around the AI industry, expectations for earnings growth at related companies remained intact. Goldman Sachs projected 27% year-over-year growth in third-quarter earnings per share for S&P 500 companies. It said more than half of the total profit increase would come from companies benefiting from investment in AI infrastructure.

Among semiconductor stocks, companies tied to custom AI chips and GPUs led the gains. Marvell Technology jumped 5.8%, while Broadcom rose 3.67% to close at $375.81. AMD gained 2.80% to $649.42. The Philadelphia Semiconductor Index added 45.09 points, or 0.34%, to 13,217.82.

AMD also outlined plans to expand supply to meet rising orders. Chief Executive Officer Lisa Su said the company would significantly increase semiconductor supply by 2027 and predicted strong demand would continue over the next several years. She added that AMD would need to secure additional advanced wafer production capacity to meet that demand. AMD is currently working with Samsung Electronics and SK Hynix to procure memory.