AI trade rolls on amid US earnings cheer

Inflation figures and the reaction to forecast-beating CoreWeave Inc Ordinary Shares - Class A (NASDAQ:CRWV) results today sustained the record position of the S&P 500 index during another positive Wall Street session.

Risers at the opening bell included NVIDIA Corp (NASDAQ:NVDA), Micron Technology Inc (NASDAQ:MU) and Advanced Micro Devices Inc (NASDAQ:AMD) after quarterly figures by cloud infrastructure business CoreWeave and by Super Micro Computer Inc (NASDAQ:SMCI) led to renewed optimism over the AI trade.

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CoreWeave’s Nasdaq-listed shares opened 23% higher after co-founder and CEO Michael Intrator said unprecedented levels of demand for the loss-making company’s services had caused second-quarter revenues to more than double to $2.6 billion (£1.9 billion). 

He added: “CoreWeave is built on the conviction that AI is foundational to every industry and that realising its full potential requires a purpose-built platform. This quarter reinforced that conviction.”

Super Micro Computer rose by 13% after its sales guidance for the third quarter came in well ahead of estimates to continue the positive trends of the current earnings season.

Bank of America reported on Monday that second-quarter S&P 500 earnings per share (EPS) is on track to grow 30% year-on-year, or by nearly 50% when including investment mark-ups by Alphabet Inc Class A (NASDAQ:GOOGL) and Amazon.com Inc (NASDAQ:AMZN).

The EPS beat rate of 76% is in line with the previous quarter’s highest level since 2021, while constructive guidance continues to push second half and 2027 estimates higher.

However, the bank noted that stock reactions suggest much of the good news was already priced in as stocks that beat both EPS and sales expectations outperformed the next day at just over half of the historical average.

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Despite this trend, US equities last week delivered one of their strongest weeks of the year as outperformance by chipmakers, hyperscalers and networking companies helped the S&P 500 index to add another 3.5% and the Nasdaq 100 to rise by 5%.

The S&P 500 index today added 0.4% after today’s inflation reading for July of 3.4% kept alive hopes that the Federal Reserve will leave interest rates on hold at its September meeting.

The second successive fall from May’s three-year high of 4.2% adds to optimism following last week’s soft payrolls reading, albeit offset by this week’s latest spike in oil prices.

Aviva Investors said the inflation report should reassure policymakers that the sharp downside surprise seen in June was neither entirely noise nor the start of a much faster disinflation process.

It added: “Recent Fed communication has emphasised the importance of incoming inflation data, and today’s release is unlikely to materially alter the near-term policy outlook.

“While the data should keep September rate-hike expectations alive, it also provides little urgency for the Fed to act immediately.”