The Nasdaq and the S&P 500 were poised to open sharply higher on Wednesday after a bullish forecast from AMD boosted struggling chip stocks, while Microsoft faltered among megacaps ahead of an interest-rate decision from the Federal Reserve.
Advanced Micro Devices soared 7.5% in premarket trading after it lifted its 2024 forecast for AI-chip sales, raising other chip stocks. Nvidia jumped 7.2%, Intel was up 2.2% and Broadcom rose 6.2%.
Microsoft lost 1.6% as it plans to spend more this fiscal year to build its AI infrastructure, even as growth in its cloud business slowed - another sign that the payoff from hefty investments in the technology could take longer than hoped.
Alphabet gained 1.6%, Meta Platforms rose 0.9% and Tesla was up 0.8%.
“AMD’s results pleased investors more than Microsoft’s disappointed, and as a result people are adding to positions in the semiconductor space,” said Sam Stovall, chief investment strategist at CFRA Research.
At 8:40 a.m. ET, Dow e-minis were up 87 points, or 0.21%, while S&P 500 e-minis were up 63.75 points, or 1.16%, and Nasdaq 100 e-minis were up 375.75 points, or 1.98%.
Nasdaq slumps as megacaps, chips fall ahead of results
Tech and chip stocks have taken a hit this month after prompting a record-breaking Wall Street run this year, on euphoria surrounding AI adoption and the prospect of early rate cuts from the U.S. Federal Reserve. Investors, who now see value in underperforming sectors, have started rotating away from megacaps.
The Philadelphia SE Semiconductor index is set to log its first monthly decline in three and its worst month since September 2022.
The Nasdaq and the S&P 500 - market-cap weighted indexes which are heavily inclined towards expensive tech stocks – are also set for their weakest month in three, while the price-weighted Dow is on track for its best monthly performance since last December.
Meta will report earnings after markets close, while results for Apple and Amazon are due on Thursday.
Quarterly earnings from tech giants Tesla, Microsoft and Alphabet have so far disappointed investors, who are questioning if the AI-driven rally has run out of steam.
Investors are now focusing on the major event of the week - the Fed’s decision and commentary on interest rates. The central bank is expected to hold rates steady and open the door for a September rate cut.
With traders fully pricing in a cut by September, according to CME’s FedWatch, the fear is that any disappointment on this front could amplify the recent equity selloff.
Fresh employment data showed a lower-than-expected rise in U.S. private payrolls in July, but that is in all likelihood not a true reflection of the labor market, which continues to moderate gradually.
Among others, T-Mobile jumped 2.8% after raising its full-year forecast for monthly bill-paying phone subscriber additions.
Mastercard gained 3% after the payments giant’s second-quarter profit rose 17%.
Pinterest slumped 8.4% after forecasting current-quarter revenue below expectations, while Match Group jumped 11% after a second-quarter revenue beat and a plan to lay off about 6% of its staff.
Boeing climbed 2% after naming aerospace industry veteran Kelly Ortberg its new president and CEO.
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