U.S. stocks start slightly higher on optimism about AI investment

Optimism revives as Alibaba expands AI investment

China's Alibaba reinforced optimism about AI by expanding AI investment, and with NVIDIA attempting a rebound, U.S. tech stocks also showed gains.

At 10 a.m. Eastern Time, the S&P 500 and the Nasdaq Composite were each up 0.2% from the previous day. The Nasdaq Composite rose 0.2% as well.

The 10-year Treasury yield rose 2 basis points (1bp=0.01%) to 4.135%. The 2-year yield also increased 2 basis points to 3.59%.

The previous day, Federal Reserve Board Chair Jerome Powell said both the labor market and inflation outlook faced risks and that "there is no risk-free path." He also said that "stock prices are considerably overvalued," which led to stock declines and rising bond yields.

Spot gold, which had been hitting record highs, traded around $3,750 per ounce, roughly unchanged from the previous day. The Bloomberg Dollar Spot Index rose 0.5%.

NVIDIA attempted to reverse the prior day's losses and turn higher. The prior day's decline had come as concerns grew about cyclical AI investment sparked by the partnership between NVIDIA and OpenAI.

Micron Technology, the U.S.'s largest memory chip maker, saw its stock fall 2% even after it raised its quarterly outlook in an after-hours earnings release.

Alibaba's American Depositary Receipts (ADR) jumped 8.8% after the company said it would increase AI investment more than originally planned and integrate NVIDIA products into its cloud platform. Cathie Wood's ARK Invest also began readding Alibaba shares two days earlier after having sold the stock four years ago, which affected investor sentiment.

Reports that the Trump administration is pursuing the acquisition of a 10% stake in Lithium Americas (LAC) as part of renegotiations over a $2.3 billion loan to the U.S. Department of Energy sent the company's shares soaring more than 90%.

Wells Fargo's Chief Equity Strategist Kwon Oh-seong told CNBC, "We are in the early stages of the AI investment cycle," maintaining an optimistic outlook. He noted that the Nasdaq's overall strong performance even after the tech bubble burst was because the Nasdaq's fundamentals were better than the S&P 500's.

Andrew Tyler, an analyst at JPMorgan Chase, said, "Of the various conversations about factors that could topple this bull market, my favorite answer was an asteroid colliding with Earth."

Charlie McElligott of Nomura Securities International, however, warned that as more people expect a market rally, portfolio hedges should be maintained. He said enthusiasm for AI forms a virtuous cycle that turns skeptics into buyers of more expensive stocks, which actually increases downside risk for equities.

Craig Johnson of Piper Sandler said, "The strong uptrend is not over yet, but the underlying momentum is weakening."

Contributing reporter Jeong-A Kim kja@hankyung.com