Artificial-intelligence stocks led a rebound on Wall Street Monday, but the advance did not extend broadly across the market.
The move followed a difficult week for growth stocks. The S&P 500 lost nearly 2%, its worst weekly performance since late June, while the Nasdaq fell 4.
Investors are now looking to quarterly results from companies tied to the AI investment cycle. Tesla and Meta Platforms are due to report Wednesday, alongside semiconductor-equipment supplier Lam Research.
The earnings arrive as investors question whether the spending behind AI chips and data centers can produce enough revenue growth to justify high expectations. Much of that investment has been financed with debt, while higher bond yields have increased borrowing costs.
Ron Albahary, chief investment officer at LNW, said the market is confronting an earnings-expectation bubble rather than the valuation bubble associated with the internet era. He expects investors to become more selective, creating a wider gap between companies that can deliver on AI-related growth expectations and businesses whose expansion depends heavily on borrowing.
Sameer Samana of Wells Fargo Investment Institute described the selling as a reality check rather than a complete breakdown, while warning that pressure could continue for days or weeks. Barclays global research chairman Ajay Rajadhyaksha also said technology earnings would be central to the week’s direction as fragile price action prompted a neutral stance on risk assets.
The immediate question is whether the coming results and capital-spending guidance can support Monday’s rebound.