3 min read
AI found new money, and the chip stocks bounced
Anthropic filed for its IPO, Meta lined up a big stock sale, and SpaceX signed a $40 billion financing agreement. The chip index jumped 2.8% on Monday.
The Close The S&P 500 rose 0.7% to 7,677. The Nasdaq gained 214 points, or 0.8%, to 26,169. The Dow added 146 points, or 0.3%. Small companies rose too. The Russell 2000 gained 0.4%. Tech led the sectors, up 1.7%, and industrials added 1.4%.
The chip index rose 2.8%, though it is still down about 12% for October. Coherent rose 5.8% and Synopsys 5.6%. Comfort Systems, a building contractor with a big data center business, jumped 7.2% after losing 9.3% on Friday. Tesla gained 5.2% after Barclays raised its rating and set a $450 target, pointing in part to a possible merger with SpaceX. Lockheed Martin rose 5.1%. Fair Isaac, the company behind FICO credit scores, fell 13.2% after it said it would keep the price of its mortgage scores at $10 for some lenders. DoorDash lost 6.1% on a report that it is in advanced talks to buy Instacart. Verizon fell 3.5% after its sales came in short of forecasts. What The Market Is Pricing In Remember the worry from two weeks ago? AI companies are spending huge sums, and with yields near 5%, borrowing is expensive. On Monday, the money showed up in a different form. Anthropic, the company behind the Claude AI models, filed to list its shares on the Nasdaq under the ticker ANT. Meta arranged about $35 billion in new stock sales, with room for up to $60 billion more starting next year. SpaceX signed a lease agreement worth about $40 billion with funds run by Apollo to pay for AI chips. When a company sells new shares to raise money, Wall Street calls it dilution. Each existing share now owns a slightly smaller slice of the company. Shareholders accept it when they think the new money will grow the whole pie faster. That's the bet investors made on Monday. Selling stock gives away a slice of ownership, but it doesn't add debt. For an industry worried about its borrowing bill, that matters.
I've seen this before. Facebook went public in May 2012 at $38 a share and raised about $16 billion. Within four months the stock had fallen by about half. Years later, it had multiplied in value. New money doesn't promise a smooth ride. The next test comes Wednesday, when Microsoft and Alphabet show how their AI spending is paying off. What's Next Three things I'm watching this week: 01 The Fed The Fed announces its rate decision on Wednesday, October 28, at 2:00 p.m. Eastern, and Chair Kevin Warsh speaks at 2:30 p.m. Traders expect no change. The question is whether he keeps a December hike on the table with oil still near $115. 02 Microsoft, Alphabet, Amazon Microsoft and Alphabet report Wednesday, October 28, after the close. Amazon follows Thursday, October 29, after the close. After Monday's money news, investors want proof that the spending turns into sales. 03 Growth and Inflation The first estimate of third-quarter growth and the PCE inflation report, the Fed's favorite price gauge, both come out Thursday, October 29, at 8:30 a.m. Eastern. AI found new money. Now it has to show the money was worth it.
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