AI Enthusiasm Redux

There is no shortage of good news in the market this morning. Netflix (NFLX) is up over 11% after announcing new subscribers that were roughly double expectations, and several other key stocks are responding positively after announcing earnings. But although Oracle (ORCL) is off its highs – it is currently up about 6% after opening over 10% higher – the story propelling that stock is also boosting other key tech stocks. And when big tech rallies, so do the major indices.

Project Stargate is providing the lift to a wide range of tech stocks. Yesterday, President Trump, flanked by OpenAI’s Sam Altman, Oracle’s Larry Ellison, and Softbank’s Masayoshi Son, announced a $500 billion AI infrastructure project.  The other partner is MGX, an Abu Dhabi based firm linked to that emirate’s sovereign wealth fund, and at present, “only” $100 billion has been committed.  Arm Holdings (ARM), Microsoft (MSFT), Nvidia (NVDA) will also be key technology partners. Unsurprisingly, all those publicly traded stocks are rising, along with several AI-linked tech and semiconductor shares. The Information Technology and Communications Services sectors are the ones propelling the S&P 500 (SPX) today.

Once again, this points out the dominance of big tech. Just before midday, the aforementioned sectors are up over 2%; of the remaining 9 sectors, five are lower, and three are up only marginally (< 0.2%). Only Consumer Discretionary is otherwise in positive territory (+0.3%), thanks to Amazon (AMZN). Never mind that only 79 of the 500 SPX stocks are higher, or that declines are outpacing advancers by about 3:2.  If the largest stocks are higher, the cap-weighted indices will follow.

Today we have five of the “Mag 7” stocks higher. We noted the various AAPL downgrades yesterday, and some of those concerns continue to weigh on that stock today. But the other stock that is modestly lower is quite curious – it’s Tesla (TSLA).

Considering TSLA’s own aspirations for AI and Elon Musk’s recent closeness to the President, it might seem peculiar that Musk was not part of the Project Stargate announcement. Instead, he threw some shade on the announcement today, stating on X that “They don’t actually have the money,” and that “SoftBank has well under $10B secured. I have that on good authority.” We’ll see who is correct over time, but for today, the market does not share Musk’s skepticism.  The promise of a huge pool of money funding AI investment, whether fully funded or not, is enough to have investors enthusiastic once again about the artificial intelligence and almost anything related to it.