US stocks saw a rebound on Monday, paring last week's slump, as investor interest returned to chipmakers and concerns over Middle East tensions eased. The S&P 500 Index rose by 0.3%, recovering from a slide caused by strong employment data that had fueled expectations of tighter Federal Reserve policy. The Nasdaq 100 Index jumped 1.6%, marking its best day in over a week and breaking a streak as its biggest weekly drop since April 2025. This resurgence was largely led by semiconductor companies like Nvidia Corp. and Micron Technology Inc., which saw gains of 5.6% after their largest sell-off since 2020.
Despite the broad market rebound, the volatility of AI stocks remained a significant factor. While most of the S&P 500's companies saw declines, the powerful influence of chipmakers was enough to drive the overall index higher. For example, Micron Technology's stock had nearly quadrupled this year due to AI demand, but its 6.7% drop on Thursday, stemming from Apple's price hikes due to increased memory costs, highlighted the sector's sensitivity. Similarly, ON Semiconductor experienced a 23.7% drop after announcing a $7 billion all-stock deal to acquire Synaptics.
Investor caution around AI stocks intensified due to concerns that their profits might not sustain the rapid stock price rallies. High bond yields, fueled by inflation worries, also contributed to pressure on these high-valuation stocks. SpaceX, an AI-involved company that had a ballyhooed initial public offering earlier in the month at $135 and briefly soared above $225, experienced significant volatility, plunging 17% last week. News that OpenAI might delay its initial public offering to next year from the second half of this year, partly to raise more cash for data centers, further added to the unease among tech investors.
The broader market context saw Wall Street staging a comeback as dip buyers emerged, lifting stocks amid renewed enthusiasm over artificial intelligence and bets on a solid economy. Easing geopolitical tensions also played a role; reports of the US and Iran agreeing to a truce helped calm investor nerves, with oil prices dropping significantly as Brent crude fell 3.8% to $7.60, lower than before the US and Israel attacked Iran. This all contributed to a complex market where general economic optimism was tempered by specific concerns about the sustainability and valuation of the AI sector.
