Wall Street’s technology-heavy Nasdaq Composite led gains on Monday as investors returned to semiconductor companies and other artificial intelligence-related stocks following last week’s sharp selloff, although concerns over borrowing costs, AI infrastructure spending and rising oil prices continued to cloud the market outlook.
The Nasdaq Composite rose 290.85 points, or 1.11%, to close at 26,430.89, according to preliminary data. The S&P 500 gained 32.48 points, or 0.42%, to 7,691.07, while the Dow Jones Industrial Average slipped 32.21 points, or 0.06%, to 51,970.20.
The recovery followed a bruising week in which the S&P 500 and Nasdaq recorded their largest weekly declines since late June. Investors had become more concerned that higher interest rates could raise the cost of financing AI infrastructure, putting pressure on semiconductor manufacturers, data-center operators and other companies whose valuations depend heavily on continued investment in the technology.
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Monday’s rebound suggested that some investors were returning to beaten-down technology shares after the intensity of the previous week’s losses. However, the recovery did not resolve the underlying questions about the profitability of AI investments or the capacity of companies to finance their expansion without putting additional pressure on their balance sheets.
The selloff has increasingly centered on the cost of building AI infrastructure and the funding required to sustain it. Semiconductor companies and cloud computing providers have benefited from expectations of rising demand for AI computing capacity, but the scale of investment has also made them vulnerable to changes in interest-rate expectations and investor confidence.
That tension has become more significant as the US bull market approaches its fourth anniversary. Technology and AI-related companies have helped support the broader rally, leaving the market sensitive to any evidence that spending commitments are growing faster than the revenues or profits needed to justify them.
Semiconductor Stocks Stage a Relief Rally
The Philadelphia Semiconductor Index, which tracks major chipmakers, snapped an eight-session losing streak during which it had fallen approximately 15.7%. The run was its longest period of consecutive declines since October 2008.
The sharp losses had left semiconductor stocks vulnerable to a recovery as investors reassessed positions following Friday’s close.
“Rubber bands can only stretch so far in one direction before they snap and start reversing, and you finally saw that enough-is-enough moment in the semiconductors after Friday’s close,” said Michael James, managing director and equity sales trader at Rosenblatt Securities in Los Angeles.
James attributed the rebound partly to the absence of further negative developments over the weekend and the extent of the preceding decline.
“Nothing changed between Friday’s close and this morning’s open, other than nothing bad happened over the weekend, and sentiment had gotten so negative that we were oversold to the point where a bounce was due,” he said.
His assessment points to an important distinction between a relief rally and a sustained improvement in market fundamentals. When stocks fall sharply over several sessions, investors may begin buying simply because prices have declined substantially and pessimism has become widespread. Such buying can produce a strong rebound without necessarily changing the outlook for earnings, financing costs or demand.
James also cautioned that the market remained exposed to further volatility as companies prepare to report quarterly results.
“The market is far from out of the woods,” he said, highlighting the importance of upcoming earnings in determining whether the recovery can continue.
For AI-linked companies, that is a serious matter. Their shares have been supported by expectations that demand for computing power will remain strong, but investors are now scrutinizing the relationship between capital expenditure, debt, cash flow and the eventual returns from AI services.
If earnings reinforce expectations of sustained demand and improving profitability, the rebound could gain further support. If results reveal higher costs, weaker margins or less convincing returns on investment, recent losses could resume.
CoreWeave and AI Financing Remain in Focus
CoreWeave remained a focal point for investors after its shares plunged more than 25% last week amid concerns about its approximately $50 billion debt burden.
The cloud computing provider surrendered early gains on Monday, despite an upgrade from Goldman Sachs to “buy” from “neutral”. The share-price response suggested that the company’s financing risks continued to weigh on investor sentiment even after the more favorable analyst assessment.
CoreWeave’s position underpins a wider vulnerability among companies supplying computing infrastructure for AI development. Expanding data-center capacity requires substantial spending on servers, advanced chips, power and facilities. Borrowing can accelerate that expansion, but it also creates fixed financial obligations that must be met even if customer demand, pricing, or funding conditions deteriorate.
Investors are therefore looking beyond headline growth and customer commitments to assess whether infrastructure providers can convert demand into sustainable cash flow. A large order book may offer revenue visibility, but it does not automatically eliminate the risks associated with capital intensity and debt servicing.
Other AI infrastructure-related stocks performed better. Nebius and Iren outperformed, indicating that investors were not abandoning the entire sector uniformly. Instead, market participants appeared to be distinguishing among companies based on their individual prospects and perceived financial risks.
Intel shares also climbed after JPMorgan upgraded the stock to “neutral” from “underweight”. In the broader market, Amazon received support after Morgan Stanley named the e-commerce and cloud computing company its “top pick”. Tesla also contributed to gains in consumer discretionary stocks.
Technology and consumer discretionary shares led advances among the S&P 500’s 11 major sectors, while utilities and real estate were among the laggards. The Dow’s modest decline, despite gains in the other major indexes, underscored the uneven nature of the recovery.
Cleveland-Cliffs shares surged after the steelmaker reported third-quarter profit above analysts’ estimates, providing an additional source of support outside the technology sector.
Earnings and Oil Prices Could Determine The Next Move
Investors are now turning their attention to a busy corporate earnings calendar, with Meta and Tesla scheduled to report on Wednesday and SpaceX expected to report on Tuesday, according to the supplied market report.
The results will provide further evidence of how major technology companies are managing costs and investment commitments as AI becomes more central to their businesses. Investors will also be watching for indications that spending on computing infrastructure is generating sufficient commercial returns to justify the scale of investment.
For companies heavily exposed to AI, strong revenue growth may not be enough if expenditure on infrastructure and financing rises just as quickly. Conversely, evidence of durable demand, better margins and stronger cash generation could help ease concerns that the sector’s expansion has become financially unsustainable.
Oil prices added another source of uncertainty on Monday. US crude futures reversed earlier losses to settle 2.2% higher at $103.66 a barrel following attacks by Yemen’s Iran-aligned Houthis on a Yemeni military training camp and renewed attacks on Saudi energy, airport and military facilities.
Higher oil prices can feed into inflation expectations and complicate the outlook for interest rates. If energy costs remain elevated, investors may become less confident that monetary policy can ease sufficiently to support highly valued growth stocks. That risk is weighing on technology companies whose valuations depend on expectations of future earnings and whose infrastructure investments may require significant external financing.
Monday also marked the 39th anniversary of Black Monday, the October 19, 1987, stock-market crash that produced the largest one-day percentage decline in the Dow Jones Industrial Average’s history. The anniversary offered a historical reminder of how quickly market sentiment can change, although the current selloff has its own distinct drivers, particularly AI investment costs, interest-rate expectations and concerns about corporate financing.
However, Monday’s gains show that demand for technology shares has not disappeared after the recent losses. But the semiconductor rebound and the mixed performance of AI infrastructure stocks suggest that investors remain selective.