Dow Jones futures gain as lower oil prices ease inflationary concerns
- US index futures remain mixed as traders await inflation updates and earnings from AI companies this week.
- Nvidia faces pressure following a board probe into CEO Jensen Huang's reported espionage targeted affair.
- Markets digest potential Democratic efforts toward stricter AI regulations and data center growth restrictions.
Dow Jones futures advance 0.65% to trade around 51,720 during the European hours on Monday. Meanwhile, S&P 500 futures gain 0.30% to trade around 7,420 and Nasdaq 100 futures decline 0.12% to trade around 27,050.
US stock futures trade mixed amid easing energy prices and inflationary concerns. Crude oil pulled back after US President Donald Trump stated that further military action against Iran is "highly unlikely," contingent on continued progress on Iran's nuclear program and the Strait of Hormuz remaining open. Trump also acknowledged that the unpopular Middle East conflict had previously inflated energy costs and contributed to recent Republican midterm election losses.
Investors braced for crucial inflation updates and earnings from major AI-related technology companies this week, all while weighing fresh corporate uncertainty surrounding Nvidia. Nvidia is set to remain firmly in the market spotlight after its board launched an independent investigation following allegations that CEO Jensen Huang was targeted in a Chinese honey trap operation.
Earnings releases from key tech players, including CoreWeave, Cisco, and Applied Materials, are scheduled throughout the week, offering further insights into the overall demand and growth outlook for the AI sector. Meanwhile, market participants are heavily focused on Tuesday’s US Consumer Price Index (CPI) report and Friday’s Producer Price Index (PPI) for clearer signals on the Federal Reserve’s upcoming interest rate policy decisions.
Last week, Wall Street posted losses with the Dow Jones Industrial Average falling 0.93%, the S&P 500 dropping 2.68%, and the tech-heavy Nasdaq Composite sliding 3.37%. The broad sell-off was largely driven by growing investor concerns that Democrats could push for stricter AI regulations and potentially restrict data center expansions.
Fed hike expectations seen intact despite recent data
Analysts at Commerzbank Research point out that the Fed’s own projections already lean firmly toward further tightening this year. They note that “of the 18 Fed officials who submitted projections for the appropriate path of interest rates in September, 16 anticipated at least one more rate hike this year,” and judge that “the data released since then are unlikely to have changed that assessment materially.” In their view, the combination of robust October payrolls and still‑elevated inflation reinforces the case for another 25 basis point increase at the December FOMC meeting, in line with the Fed’s earlier guidance.
AI stocks FAQs
First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.
There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.
Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.
Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.
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