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US technology shares rebound as AI spending concerns ease briefly
US technology shares rebounded on Tuesday after a brief selloff over concerns about the scale and cost of investment in artificial intelligence. The recovery helped lift the Nasdaq and S&P 500, while the Dow fell as Apple shares dropped following a weaker margin forecast.
The Nasdaq rose 0.83% and the S&P 500 gained 0.37%, while the Dow slipped 0.38%; Nvidia and other chipmakers advanced. The selloff had taken the Nasdaq 10% below its 6 October record close, putting it in correction territory, but it ended Monday’s session there. Brent crude also fell to $103 a barrel from $117 at the end of October, and investors expected potential Democratic gains in the midterms could bring tighter AI regulation.
In short
- Tech stocks recovered after worries about AI spending.
- The Nasdaq rose 0.83%, while the Dow fell 0.38%.
- The Nasdaq had been 10% below its October record.
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The case for
The rebound suggests investors may have overreacted to concerns about AI investment: substantial spending could support future growth, productivity and demand for chipmakers, while a pause in the selloff may reflect confidence that leading technology firms can still earn returns from their investments. Lower oil prices could also ease cost pressures and support the wider market.
The case against
The brief recovery does not resolve whether the scale and cost of AI investment will produce profits sufficient to justify it, so the selloff may reflect a reasonable reassessment of risk. A correction in the Nasdaq, weaker margin guidance from Apple and the prospect of tighter AI regulation could all weigh on technology valuations, while a one-day rise offers limited evidence that those concerns have passed.
Explained simply
US technology shares include companies that make software, online services and computer chips. The Nasdaq has a large concentration of these firms, while the S&P 500 and Dow track broader groups of major US companies.
Artificial intelligence has become a major focus for technology firms, which are spending heavily on data centres, chips and other equipment. Investors are weighing the possible future returns against the cost of that investment, as well as the effect of new rules on the industry.
Chipmakers such as Nvidia supply hardware used to develop and run AI systems, while Apple sells consumer devices and services. Changes in these companies’ share prices can influence major US stock indexes and reflect wider views about business prospects and the economy.
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Originally published by The Guardian as “US tech stocks recover after selloff spooks investors over AI spending”.