Investing.com — U.S. stocks rebounded strongly on Wednesday after a bruising selloff in technology and chipmaking stocks over the last two sessions.
Upcoming earnings from memory chipmaker are set to provide more cues on the artificial intelligence trade.
At 11:40 ET (15:40 GMT), the S&P 500 index was up 0.7% to 7,416.86 points, the tech-heavy added 0.7% to 25,769.53 points, and the blue-chip jumped 1.1% to 52,215.29 points, within striking distance of its intraday record high.
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Micron slips ahead of Q3 earnings
Micron extended losses after sliding in the previous session. The company is among the largest memory chipmakers in the world, along with Samsung and SK Hynix.
Micron shares last dipped 1.3%.
The firm is set to report its fiscal third-quarter earnings after the bell. The print will be closely watched for more cues on AI-driven demand for memory, which has provided a major windfall to Micron and its peers over the past year.
But the earnings come amid investors holding lofty expectations for Micron’s guidance.
Micron is expected to post earnings per share of $19.92 on revenue of $34.66 billion for the three months ended May, according to Investing.com data.
Wall St slammed by tech wipeout; Chips worst hit
A sharp two-day liquidation across Wall Street benchmarks has exposed fractures in the artificial intelligence trade, as investors aggressively unwind crowded positions amid stretched valuations and a higher-for-longer Federal Reserve outlook.
The reversal marks a turning point for the tech-heavy indexes, which had previously demonstrated remarkable resilience, scaling record highs even as markets navigated the geopolitical fallout of a three-month war with Iran.
However, that momentum has rapidly given way to an multi-theater tech rout as the market confronts a painful math problem: whether explosive corporate growth can outpace the friction of sustained restrictive monetary policy.
Tech mega-caps have seen their earnings multiples balloon to historical extremes, leaving absolutely no margin for error just as their capital expenditure bills come due.
With the Fed poised to keep borrowing costs elevated – CME FedWatch data currently implies 50 basis points of further tightening by year-end, including a 40% probability of a July hike – the financial burden of funding the AI arms race has grown heavier.
For these cash-hungry tech giants, which rely on issuing debt to bankroll their blowout infrastructure spending, rising yields, in theory, could erode their long-term valuation models, and could promt an institutional scramble to de-risk before the next corporate earnings cycle.
The slid nearly 8% on Tuesday. The Nasdaq tumbled 2.2% and the S&P 500 shed 1.4%, while the Dow fell marginally.
Losses in the blue-chip gauge were limited by investors pivoting into non-tech sectors such as financials, utilities, and healthcare.
PCE, GDP data waited for more cues on rates
Focus this week also will be squarely on upcoming data for May, which is due on Thursday.
The print is the Federal Reserve’s preferred reading and is widely expected to factor into the central bank’s plans for interest rates.
A final reading on first quarter is also due on Thursday and is expected to reflect some headwinds from the U.S.-Iran war, which began in late-February.
Ambar Warrick and Pranav Kashyap contributed to this article