Market Overview
The S&P 500 advanced 0.2% on Monday, bouncing back after a rough week for artificial intelligence-related stocks. The Nasdaq Composite gained 0.5%, while the Dow Jones Industrial Average fell 70 points, or 0.2%. The move reflected a cautious rebound as investors reassessed the durability of the AI-driven market rally.
AI Trade Regains Momentum
Nvidia shares rose 2% following a week of skepticism over whether the AI industry could sustain its rapid infrastructure growth, particularly in energy demand. Other semiconductor stocks also gained ground, with Advanced Micro Devices up 2% and Micron Technology climbing 4%. Despite last week’s volatility, analysts at Barclays said AI-related capital expenditures continue to provide a powerful tailwind for the broader market.
“The AI capex story is showing no signs of slowdown,” noted Venu Krishna, head of U.S. equity strategy at Barclays. He emphasized that multiple industries beyond technology are benefitting from rising AI investments, though he also cautioned about market concentration risks.
Corporate Activity Lifts Sentiment
Mergers and acquisitions also contributed to the positive tone. Shares of Electronic Arts rose 4% after the company announced it would be taken private in a $55 billion deal, one of the largest private equity transactions in history. According to Goldman Sachs, U.S. M&A activity has surpassed $1 trillion year-to-date, up 29% compared to the same period in 2024, signaling robust corporate appetite for consolidation despite higher borrowing costs.
Policy and Economic Watch
Investors are closely monitoring political developments as a potential U.S. government shutdown looms. Over the weekend, President Donald Trump warned of possible mass layoffs of federal workers if lawmakers fail to approve new funding. The uncertainty adds another layer of risk heading into a crucial week for markets.
In addition, Friday’s nonfarm payrolls report is expected to provide key insights into the health of the labor market. A “goldilocks” outcome — neither too strong nor too weak — may be necessary to keep the current bull market intact. Traders are balancing expectations of continued growth with the Federal Reserve’s policy stance as inflation remains under scrutiny.
Monthly Market Performance
Despite recent turbulence, U.S. equities remain on track for gains in September. The S&P 500 is up 3% so far this month, the Dow has added 1%, and the Nasdaq has led with a 5% rally, supported by renewed enthusiasm for technology and AI-related stocks.
