Dow Jones futures jump as AI earnings and easing geopolitical risks lift market sentiment

US index futures rallied as President Trump indicated that further military action against Iran was less likely.
Optimism returned to the AI sector following CoreWeave’s better-than-expected quarterly results and the prospect of Anthropic’s market debut.
A recovery before the market opening comes after Tuesday’s declines, when CPI data heightened expectations of a Federal Reserve rate hike.

Gains across US index futures during Wednesday’s European trading hours see Dow Jones futures up 0.16% at around 52,400. Nasdaq 100 futures climb 1.45% to approximately 28,230, while S&P 500 futures rise 0.60% to around 7,590.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Renewed appetite for risk lifted US stock futures sharply as geopolitical tensions showed signs of easing. Further military action against Iran may no longer be necessary, US President Donald Trump indicated, with US Secretary of State Marco Rubio backing that position at the G7 summit. Meanwhile, Congressional Democrats plan to leverage the approaching government funding deadline to push the administration towards a diplomatic solution.

Enthusiasm for the wider artificial intelligence sector revived after AI computing provider CoreWeave posted strong financial results, giving market sentiment a further lift. Having beaten quarterly earnings expectations and raised its outlook, the company saw its shares rally nearly 8% in after-hours trading, highlighting sustained demand for AI infrastructure. Reports of a possible Anthropic market debut as early as next week provided additional support for confidence in the sector. The company is seeking to raise up to $90 billion at a diluted valuation of around $1.4 trillion.

Tuesday’s Wall Street declines preceded this recovery: the Dow Jones lost 0.35%, the S&P 500 declined 0.38% and the Nasdaq Composite retreated 0.74%. The latest CPI data weighed on US shares by reinforcing expectations that the Federal Reserve would raise rates in December. According to the CME FedWatch tool, the probability of a December rate increase stood at 85%.

What does October’s upside surprise in US core inflation signal?

Persistent underlying price pressures are evident in the stronger-than-expected US core inflation reading, according to Societe Generale’s Jan Groen, who notes that “October core CPI surprised to the upside at 0.3% m/m.” While the latest inflation figures proved firmer than anticipated, he points to markets awaiting the corresponding PCE data for a more complete assessment of the inflation trajectory.

AI stocks: frequently asked questions

How is artificial intelligence defined?

As an academic discipline, artificial intelligence aims to reproduce human cognitive functions, logical understanding, perception and pattern recognition in machines. Commonly shortened to AI, the field encompasses artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. Its ultimate objective is to develop artificial general intelligence, or AGI: a machine capable of solving arbitrary problems without having been trained specifically to solve them.

How is AI used in practice?

Among the many applications of artificial intelligence, generative AI platforms are the most familiar. Trained on large language models (LLMs), platforms such as ChatGPT and Google’s Bard respond to text-based queries. Users can also turn their own text prompts into original images through the Midjourney program. Probabilistic techniques underpin other AI applications that assess an entity’s characteristics or how it is perceived. For example, Upstart’s lending platform assesses applicants’ creditworthiness through an AI-enhanced credit rating system that searches the internet for information about their careers, wealth profiles and relationships. Elsewhere, AI draws on extensive databases of scientific studies to propose potential new pharmaceuticals for laboratory testing. By collecting and organising information about viewing habits, YouTube, Spotify, Facebook and other content aggregators use AI to recommend personalised content to users.

Which stocks offer exposure to the AI sector?

Semiconductor company Nvidia (NVDA) makes AI-focused computer chips as well as some of the platforms on which AI engineers develop applications. Because it supplies the tools required for further AI applications, many supporters regard Nvidia as a picks-and-shovels investment in the AI revolution. Another company in the field is Palantir Technologies (PLTR), which specialises in “big data” analytics. Through substantial contracts with the US intelligence community, its Gotham platform is used to examine data, identify intelligence leads and support pattern recognition. Major corporations use Palantir’s Foundry product to monitor employee and customer data for predictive analytics and anomaly detection. Meanwhile, Microsoft (MSFT) owns a sizeable stake in OpenAI, the privately held creator of ChatGPT, and has incorporated OpenAI’s technology into its Bing search engine.

Could enthusiasm for artificial intelligence fuel another stock market bubble?

AI-linked shares began climbing after ChatGPT became available to the public in late 2022. In the six months after its release, Nvidia, for example, gained well over 200%, quickly prompting Wall Street commentators to question whether another technology bubble was taking hold. Renowned investor Stanley Druckenmiller, who has held substantial investments in both Palantir and Nvidia, argued that bubbles never last just six months. In his view, if AI enthusiasm developed into a bubble, extreme valuations would persist for at least two and a half years or longer, as they did during the DotCom bubble of the late 1990s. The best assessment at the midpoint of 2023 was that the market was not in a bubble, at least for the time being. Although Nvidia then traded at 27 times forward sales, analysts anticipated exceptionally strong revenue growth for years ahead. By comparison, the NASDAQ 100 traded at 25 times earnings in mid-2023, against 60 times earnings at the peak of the DotCom bubble.