Tech Leads Stock Market Gains: A Critical Look

Stocks rebounded, fueled by tech’s promising earnings and a surprisingly optimistic forecast from Boeing. The market seems to be latching onto any good news it can find. Yet, can this rally truly last?

The initial spark? Two tech companies, MongoDB and Credo Technology, revealed better-than-expected earnings, riding the artificial intelligence (AI) wave. Boeing chimed in, projecting increased aircraft deliveries and positive free cash flow. Color me skeptical on Boeing; they haven’t turned a profit since 2018. Let’s see if they actually deliver on this forecast.
>

President Trump’s announcement of his future Fed chair pick added another layer. Still, the market’s immediate focus remains fixed on the next Federal Reserve meeting and the potential for interest rate cuts. CME FedWatch currently anticipates a high likelihood of a rate cut.

Louis Navellier points out a crucial dynamic: Semiconductors are spearheading this rally, suggesting the AI theme’s volatility is rising despite massive data center buildouts. He also flags a developing rivalry for AI dominance. Nvidia, the current leader, faces competition from Alphabet and Amazon, with the latter launching its own AI chip. This intensifying competition could certainly reshape the landscape. Will Nvidia maintain its lead, or will these tech giants chip away at their market share?

The Nasdaq Composite, Dow Jones Industrial Average, and S&P 500 all closed in positive territory. But these broad indexes only tell part of the story.
>

MongoDB’s impressive earnings and raised guidance certainly caught attention, with CEO CJ Desai highlighting the strength of their Atlas product and the company’s position to capitalize on the AI shift. Their stock jumped, though it remains significantly below its all-time high. Companies see MongoDB as a unified platform, and that’s what Desai is betting on.

Credo Technology also benefitted from the AI enthusiasm, reporting strong earnings and projecting upbeat guidance. CEO Bill Brennan attributed this growth to the build-out of AI training clusters. It’s worth noting that these are their strongest quarterly figures yet. Their bullish outlook extends through 2026, they assert.

Beneath the surface, a mixed picture emerges. Earnings, according to Jason Zweig, should hit an all-time high for S&P 500 companies. Profit margins are also reportedly at record levels. This could be a support to this bull market.

Several tech stocks, including Asana, Box, CrowdStrike, and others, will release their earnings after the bell. Their results could either reinforce or undermine this positive momentum. American Eagle Outfitters, on the consumer discretionary side, will also report. Keep an eye on how consumer spending trends are reflected in their numbers.

The market’s recent gains seem heavily reliant on the AI narrative and, perhaps, a dose of wishful thinking. A possible Fed rate cut is another factor investors are expecting to see for positive movement.

Having witnessed similar patterns before, I’m cautiously optimistic. The AI sector shows real promise, but excessive hype could easily lead to a correction. While these earnings are fundamental to growth, the reliance on future earnings could be a source of concern. The true test will be whether these companies can sustain this growth and profitability in the long run. Watch what happens when the Fed releases the September Personal Consumption Expenditures Price Index (PCE) data on Friday.

Read Original

Keywords: Tech stocks, AI stock market, Fed rate cut, Semiconductor rally, Nvidia AI competition, MongoDB earnings, Credo Technology, Boeing forecast