AI shares rebound ahead of key US economic data

US equities closed higher on Monday, with a rebound in artificial intelligence (AI)-related shares helping the S&P 500 recover some of last week’s losses. The S&P 500 gained 0.70%, the Nasdaq rose 1.10% and the Dow advanced 146 points. However, concerns remained about the sustainability of heavy AI investment, particularly as the cost of financing data centres and securing advanced chips continues to rise. Anthropic’s filing for an initial public offering (IPO) added to the sector’s focus, with the potential listing set to test investor appetite for companies developing advanced AI models. 

Chipmakers rallied, with Nvidia up 2.40%, Micron gaining 3% and AMD rising 2.80%. Tesla climbed 5.20% after Barclays upgraded its rating to overweight from equal weight, while Meta fell 1.90% despite plans to raise up to US$95 billion through share sales to fund its AI ambitions. Verizon also declined after reporting weaker-than-expected revenue. Investor attention now turns to third-quarter earnings from Alphabet, Microsoft and Amazon, due later this week, which could provide further insight into technology sector performance and the outlook for AI investment. Alphabet fell 1.10% and Amazon slipped 0.40%, while Microsoft gained 1.50%.

European markets began the week in positive territory as investors welcomed softer oil prices and turned their attention to a heavy calendar of economic releases and monetary-policy announcements. The Euro Stoxx 50 climbed 1%, with the Stoxx 600 gaining 0.80%. Energy-sensitive sectors benefitted most from the decline in crude: travel and leisure gained more than 1.50%, while industrial goods and services, banks, and automobiles and parts each rose by more than 1%. Basic resources, construction and materials, and personal and household goods also ended higher. The gains were not universal, however: Banco Santander lost around 3% and Telefónica 7% amid their Brazilian exposure, while Galp sank more than 10% after its proposed tie-up with Moeve across refining, chemicals and fuel retail fell through, despite robust quarterly earnings.

In the UK, the FTSE 100 recovered 0.70% following two days of declines, supported by a sharp rally in defence and technology-related shares. Computacenter jumped more than 10% after lifting guidance on continued AI-driven demand, while Babcock, Rolls-Royce and BAE Systems rose 6.50%, 5.70% and 3.50%, respectively. Cheaper fuel also benefitted International Airlines Group and InterContinental Hotels Group, both up roughly 4%. Oil majors moved in the opposite direction, with Shell down 0.80% and BP 1.10%. Germany’s DAX finished just over 1% higher and France’s CAC 40 added 0.84%.

Asian markets ended the day mixed, as investors remained cautious ahead of key technology earnings and US Federal Reserve policy decisions. Japan’s Nikkei 225 fell 0.80% to 62 189.65, while the Shanghai Composite dropped 0.03%. In contrast, Hong Kong’s Hang Seng Index gained 0.51% to 23 211.81. Semiconductor and AI-related shares came under pressure as investors awaited results from major US technology companies, as well as South Korean chipmakers Samsung and SK Hynix, for further insight into demand for AI-related investments.

The JSE closed higher on Monday, with the All Share Index gaining 1.03% to 109 130 points. Gains were broad-based, with major apparel retailers advancing 2.71%, while leading banks rose by up to 2.35%, supporting the financial sector. The metals and mining sector also contributed, rising 1.70%, while luxury goods shares added 1.27%. Meanwhile, at 20h43 SAST, the rand weakened by 0.28% against the US dollar to R16.64, by 0.09% against the British pound to R22.21 and by 0.11% against the euro to R18.60.

Crude oil prices fell to around $101.50 a barrel, as diplomatic efforts to ease tensions between Saudi Arabia and Iran offered some relief to markets. Saudi Arabia’s defence minister held talks with Iranian officials in Tehran amid heightened concerns over attacks by Iran-aligned Houthi militants in Yemen, which have targeted Saudi Arabia in recent weeks. Despite the diplomatic engagement, the risk of further disruption to oil production, refining and export infrastructure remains a concern for investors. In the US, authorities approved the release of up to 400 000 barrels from the Strategic Petroleum Reserve on Friday to help offset a supply disruption at a Louisiana refinery. However, the outlook for increased US oil production remains uncertain, as producers remain cautious about committing to major investments amid volatile prices and ongoing geopolitical risks.

Brent crude dropped 0.69% to $115.92 per barrel at 20h11 SAST. Precious metals were mostly higher, as gold gained 0.49% trading at $4 015.26 an ounce and silver rose 0.16% to $53.98. In contrast, platinum declined 1.77% to $1 534.75.