US Stocks Rally as AI Earnings and Fed Signals Lift Sentiment
TREE NEWS reports: On Thursday, US stocks experienced a significant risk-on rally, with high-beta growth stocks leading the charge. The Dow, S&P 500, and Nasdaq all gained over 1% intraday. Snowflake surged as much as 26% after strong quarterly results, while Tesla climbed nearly 8% ahead of its Cybercab event. Cryptocurrency-linked stocks like Strategy and Coinbase saw double-digit gains, reflecting a broad resurgence in risk appetite.
AI Earnings: Dell and Snowflake Beat, Broadcom Disappoints on Guidance
The rally was fueled by robust earnings from Dell Technologies and Snowflake, which reinforced confidence in AI infrastructure and enterprise AI demand. Dell reported record AI server orders of $60.9 billion and raised its full-year guidance significantly. Snowflake’s product revenue grew 37% year-over-year, with AI contributing to half of its growth acceleration. However, Broadcom, despite a 221% surge in AI semiconductor revenue, saw its stock drop nearly 7% intraday because its fourth-quarter revenue guidance slightly missed expectations. This highlights that markets now demand stronger forward guidance from AI companies.
Fed’s Waller Turns Slightly Dovish, Easing Rate Hike Fears
Fed Governor Christopher Waller signaled that if August inflation data continues to improve, he would prefer to keep rates unchanged. This marked a subtle shift from his previous hawkish stance and helped cool expectations for a September rate hike. Market-implied probability of a 25-basis-point hike dropped to around 50%, and the 10-year Treasury yield fell to about 4.75%. This provided a tailwind for high-valuation growth stocks.
Broad Risk-On Rally: From AI to Crypto and Tesla
The rally extended beyond AI names. Robinhood jumped 17%, Strategy rose 15.4%, and Coinbase gained 11.9% as Bitcoin neared $80,000. Tesla’s gains were also tied to its upcoming robotaxi unveiling. Bloom Energy climbed nearly 10% on AI data center power demand themes. The market is now pricing in a broader AI investment cycle, benefiting not just chipmakers but also software, data infrastructure, and energy providers.
Key Takeaways for Investors
- AI earnings quality matters: Beating estimates is no longer enough; forward guidance is critical. Broadcom’s drop despite strong numbers underscores higher valuation scrutiny.
- Fed policy remains data-dependent: Waller’s comments are conditional on inflation. Friday’s jobs report and next week’s CPI will be pivotal for September’s decision.
- Risk-on is broad but selective: High-beta assets are rallying, but investors should differentiate between companies with tangible AI catalysts and those merely riding the sentiment wave.
