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

President Trump’s indication that further military action against Iran was less likely sent US index futures sharply higher.
Optimism returned to AI stocks as CoreWeave beat quarterly expectations and Anthropic moved towards a possible market debut.
Tuesday’s CPI-driven losses, prompted by stronger expectations of a Federal Reserve rate rise, gave way to a pre-market recovery.

0.16% is the gain in Dow Jones futures during Wednesday’s European trading, with the contract near 52,400. S&P 500 futures are up 0.60% at around 7,590, while Nasdaq 100 futures climb 1.45% to roughly 28,230.

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

Signs of easing geopolitical tensions restored risk appetite, lifting US stock futures sharply. Further military action against Iran may no longer be necessary, US President Donald Trump indicated. US Secretary of State Marco Rubio backed that position at the G7 summit. Congressional Democrats, meanwhile, plan to use the looming government funding deadline to press the administration towards a diplomatic resolution.

CoreWeave shares rallied nearly 8% in after-hours trading as quarterly earnings beat expectations and the company raised its outlook. The AI computing provider’s strong results highlighted resilient demand for AI infrastructure and revived enthusiasm across the artificial intelligence sector. Reports of a potential Anthropic market debut as early as next week added support to sentiment. The company is seeking to raise up to $90 billion at a diluted valuation of about $1.4 trillion.

Tuesday’s Wall Street session had ended lower, with the Dow Jones down 0.35% and the S&P 500 losing 0.38%, while the Nasdaq Composite declined 0.74%. The latest CPI report weighed on US equities by reinforcing expectations of a December rate rise from the Federal Reserve. The CME FedWatch tool put the probability of a December increase at 85%.

0.3% monthly rise: US October core inflation exceeds expectations

“October core CPI surprised to the upside at 0.3% m/m.” That was the assessment from Societe Generale’s Jan Groen, who highlighted the stronger-than-expected US inflation figures. In his view, the firm core reading signals persistent underlying price pressures. Markets are awaiting the corresponding PCE figures for a more complete assessment of the inflation trend.

AI stocks: key questions answered

Artificial intelligence: what does it mean?

At its core, artificial intelligence is an academic field focused on reproducing human cognitive functions in machines, including logical understanding, perception and pattern recognition. Commonly shortened to AI, it encompasses artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The field’s ultimate objective is artificial general intelligence, or AGI: a machine capable of tackling arbitrary problems it has not been trained to solve.

AI applications: where is the technology used?

Artificial intelligence has a wide range of applications. Among the best known are generative AI platforms, including ChatGPT and Google’s Bard platform, which draw on training using large language models (LLMs) to respond to text-based questions. Midjourney creates original images from text supplied by users. Elsewhere, AI uses probabilistic methods to assess an entity’s characteristics or how it is perceived. Upstart’s lending platform, for example, evaluates applicants’ creditworthiness through an AI-enhanced credit rating system. It searches the internet for information about their careers, wealth profiles and relationships. Other AI systems analyse large databases of scientific research to propose potential new pharmaceuticals for laboratory testing. Content aggregators such as YouTube, Spotify and Facebook collect and organise information on viewing habits, using AI applications to recommend personalised content.

AI stocks: which companies have exposure?

Nvidia (NVDA) supplies AI-focused computer chips and some of the platforms engineers use to develop AI applications. The semiconductor company is regarded by many supporters as a supplier of the essential tools underpinning the AI revolution, providing what is needed to develop further applications. Palantir Technologies (PLTR), a “big data” analytics business, holds substantial contracts with the US intelligence community. Its Gotham platform helps those agencies sift through information, identify intelligence leads and support pattern recognition. Major corporations use its Foundry product to monitor employee and customer data for predictive analytics and anomaly detection. Microsoft (MSFT), meanwhile, owns a substantial stake in OpenAI, the privately held creator of ChatGPT. OpenAI’s technology has been incorporated into Microsoft’s Bing search engine.

200% Nvidia rally: does AI risk a new stock bubble?

Nvidia gained well over 200% in the six months after ChatGPT’s public launch in late 2022, as a broad rally took hold in AI-related shares. Wall Street commentators quickly questioned whether another technology bubble was developing. Prominent investor Stanley Druckenmiller, who has held sizeable investments in both Palantir and Nvidia, argued that bubbles never last only six months. If enthusiasm for AI did turn into a bubble, he said, 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. By the midpoint of 2023, the best assessment was that the market was not in a bubble, at least for the time being. Nvidia was trading at 27 times forward sales, but analysts expected exceptionally strong revenue growth for years ahead. For comparison, the NASDAQ 100 traded at 60 times earnings at the DotCom bubble’s peak, against 25 times earnings in mid-2023.