Stock indexes rose at the close Wednesday in response to talk of a potential merger of two companies owned by Elon Musk, SpaceX and Tesla. The talk prompted some investors to take a fresh look at technology stocks. The S&P 500 gained for the third session in a row.
The Dow Jones Industrial Average rose 0.69% at the close to 52,857.04 points.
The S&P 500 ended the day up 0.58% at 7,757.17 points.
The Nasdaq Composite gained 1.05% to 26,702.86 points.
The Russell 2000 index of mid-cap companies is up 0.35% at 2,783.26 points.
The VIX volatility index fell 3.81% to 16.65 points.
Investors are assessing companies’ third-quarter results. SpaceX shares are up 9% after Musk said Tuesday that a merger of SpaceX and Tesla would be a good idea. SpaceX also reported its first profit as a public company. Tesla shares are up 1.5%.
“There is potential for significant gains in artificial intelligence. AI infrastructure is capital-intensive, and SpaceX has greater resources than many smaller firms. If pressure in the AI sector grows, SpaceX could take over infrastructure from smaller competitors,” said Ipek Ozkardeskaya, a senior analyst at Swissquote.
Ozkardeskaya added that a merger with Tesla could be a good solution, provided both companies can prove that the synergies bring value to each of them.
She noted, however, that investors could reject such an idea if it would be more beneficial for Tesla to seek AI synergies with other entities.
“It looks like SpaceX delivered exactly what the market was expecting: proof that demand tied to artificial intelligence is very real. That improved sentiment not only toward SpaceX itself, but also toward the entire AI ecosystem,” said Simon Wiersma, chief investment strategist at ING.
Shares of Super Micro Computer rose more than 10% after the AI server maker issued forecasts for quarterly revenue and profit margin that exceeded Wall Street estimates, a sign that demand for AI solutions remains strong.
Shares of competitors HPE and Dell gained 4% and 6%, respectively.
“Investors are by nature bipolar beings, at least when it comes to their sentiment. Solid financial results and constructive forecasts, like those presented by SpaceX and Super Micro, are certainly exactly the medicine the market needs,” said Stephan Kemper of BNP Paribas Wealth Management.
“SpaceX suggests the road to success is even longer, but that underlying tension, or the experience of excessive enthusiasm and excessive capitalization, has not changed, in my view,” said Joe Zidle, chief market strategist at Cresset.
Concerns about the stability of the AI industry have weighed on market sentiment lately, as investors focused on AI investments backed by debt and on whether demand for infrastructure justifies companies’ spending.
Zidle predicts, however, that the current earnings season will show that many AI-related companies continue to see rising demand.
“I think when we look back at the end of the earnings season, SpaceX will not be an exception or a phenomenon. It will be something that, in my view, becomes more common in this sector,” he said.
According to The Wall Street Journal, citing a draft IPO prospectus, Anthropic could spend $750 billion on additional computing power in the coming years. Meanwhile, Elon Musk’s ambition to bring online 10 GW of computing power by the end of 2027 will cost about $500 billion, according to estimates by Mike O’Rourke of Jonestrading.
Netflix shares fell more than 5% after the streaming giant issued a fourth-quarter profit forecast that came in weaker than expected, just days after laying off 6% of its employees.
AT&T shares fell more than 6%, even though the telecommunications giant reported third-quarter results that were better than expected.
A court in the state of New Mexico ruled Wednesday that Meta must pay $25 billion in penalties for sharing Facebook users’ data with Cambridge Analytica, which was involved in Donald Trump’s 2016 election campaign, and for deceiving the public in the matter. The company’s share price rose about 1%.
In the U.S., the MBA mortgage applications index fell. The seasonally adjusted index dropped 5.3% in the week ended Oct. 16. The previous week, it fell 2.7%.
U.S. crude oil inventories fell by 3.06 million barrels, or 0.74%, last week to 412.52 million barrels. Gasoline stocks fell by 2.95 million barrels, or 1.42%, to 205.31 million barrels over the same period.
Distillate fuel reserves, including heating oil, rose by 1.68 million barrels, or 1.63%, to 104.29 million barrels.
In the oil market, November WTI contracts are down 0.25% to $97.58 a barrel, while December Brent futures are up 0.63% to $109.48 a barrel. (PAP)
