U.S. markets continue AI-led rally on 7th day of shutdown

AMD raises price target, Dell Technologies raises AI-related outlook

On the 7th (local time), U.S. stocks opened higher as optimism about artificial intelligence (AI) continued to hold after the previous day, despite the U.S. government entering its seventh day of shutdown; however, the gains were somewhat smaller.

At 10 a.m. Eastern Standard Time, the S&P500 index and the Nasdaq Composite were each up 0.1%. The Dow Jones Industrial Average was trading at about the same level as the previous day.

With the U.S. government shutdown continuing for a seventh day and demand for safe-haven assets rising, spot gold traded at $4,005 per ounce for the first time on the COMEX market as of 9:50 a.m. that day. The Bloomberg dollar spot index rose 0.2%.

The 10-year Treasury yield was 4.15% and the 2-year Treasury yield was 3.59%, trading at levels with little change compared to the previous day.

On the day, Dell Technologies rose 5% after nearly doubling its revenue and earnings growth rate forecasts for the next two years due to AI-related demand. In addition, IBM's decision to integrate Anthropic's AI technology into its software solutions pushed its stock up 3.2 %.

AMD, which had surged 24% the previous day on a large deal with OpenAI, was also up 5.4% and trading at $214. Jefferies sharply raised AMD's price target from $170 to $300 on the day.

While major companies are signing multi-billion-dollar contracts related to building AI infrastructure, some fear it could end in a collapse similar to the dot-com bubble 25 years ago.

Wall Street traders said, "A sure investment rule in the U.S. market is 'don't fight the Fed,' and it seems that this principle applies to AI stock trading as well." Bobby Molavi, a macro trader at Goldman Sachs, said, "Regardless of what AI ultimately looks like or when that will happen, the current momentum and trajectory are clear," suggesting it is difficult to fight it now.

However, Chris Montague of Citi said, "The risk of profit-taking has increased sharply across the U.S. market," adding, "Especially for the Nasdaq, that risk is high and could hinder further gains."

Because of the U.S. government shutdown, releases of major economic indicators such as the September jobs report have been suspended, reducing the amount of information related to the Federal Reserve's next interest rate decision.

This week and next week, the Federal Reserve Board's minutes and speeches by Vice Chair Michelle Bowman, Board member Steven Marion, and Minneapolis Fed President Neel Kashkari are scheduled.

Contributing reporter Kim Jeong-a kja@hankyung.com