Written by: Chaoxiang Research

On Monday, the technology sector of the U.S. stock market collectively rebounded. The fundamental driving force behind this rebound is not a new catalyst, but rather a correction from the excessively pessimistic stance over the previous five trading days. Heavily weighted stocks such as Tesla, Google, and Nvidia rose simultaneously, pushing all three major indexes to close up, indicating that the market's confidence in the AI investment cycle, although shaken, has not collapsed.

Market Performance

The S&P 500 rose by 1.18% to 7440.43 points, with the Nasdaq leading with a 2.07% increase to 25820.144 points, while the Dow Jones rose 0.59% to a new high of 52182.74 points. The VIX panic index fell 4.13% to 17.65. The extent of the rebound is reasonable, without signs of excessive euphoria.

Tesla saw the largest increase of 8.5%, Google (which was officially included in the Dow on Monday) rose nearly 5%, and Nvidia reversed five consecutive declines with a gain of over 1%. SpaceX rose more than 7%, although it will only be included in the Nasdaq 100 next week, it has already reflected a market appetite for growth stocks is recovering. This indicates that the market has not abandoned its confidence in large tech stocks; rather, it has made reasonable adjustments from earlier high levels.

The Philadelphia Semiconductor Index rose 3.83% to 13709.66 points. TSMC ADR rose 5.24%, AMD rose 3.43%, Marvell climbed over 4%, and Western Digital had the largest increase at 10%. However, Advanced Micro Devices fell more than 8%, suggesting not all semiconductor stocks are being treated equally. The information technology sector overall rose 1.7%, indicating that the rebound is mainly in large-cap stocks rather than a broad-based rally.

Oil prices rebounded to $70.75 per barrel (up 2.20%), and Brent reached $73.15 per barrel (up 1.661%). However, gold fell 1.77% to $4016.36 per ounce, and silver fell 1.20% to $58.2841 per ounce. This not only reflects a short-term easing of tensions in the U.S.-Iran conflict but also shows a real decline in the market's demand for safe-haven assets. Bitcoin rebounded to over $60,000 during the session, showing a strong correlation with tech stocks, as crypto assets have become an adjunct to tech stock sentiment.

The U.S. dollar index fell 0.24%, and the yen reached a nearly 40-year low at 161.94. The yield on the 10-year U.S. Treasury bond fell 0.20 basis points to 4.3666%, while the two-year yield rose 0.62 basis points to 4.0983%. The yield curve steepened slightly, suggesting a rebound in market expectations for long-term growth.

Macro and Outlook

After mutual attacks between the U.S. and Iran over the weekend, both sides claimed a ceasefire, with Trump stating talks on Tuesday in Doha, which Iran immediately denied. The Defense Minister warned that the conflict could reignite at any time. This mutual denial has been seen too many times in the Middle East. From a supply fundamental perspective, ships continue to depart the Gulf, and Iranian oil is still seeking buyers; the strikes in Ukraine on Russian refining facilities have actually increased available crude oil for export. It's unlikely that oil prices will sustain this rebound unless a large-scale conflict truly erupts.

The Supreme Court ruled that Cook can temporarily remain on the Federal Reserve Board, and the bond market was almost indifferent. The market has already priced in this uncertainty. More noteworthy is JPMorgan's view: the current yield on the 10-year U.S. Treasury bond is 27 basis points lower than model valuations, which is the largest deviation since March 2023. In other words, the bond market may be overvalued. If the employment report on Thursday is strong again, it will directly raise tightening expectations, which would be unfavorable for bond prices.

Goldman Sachs expects Q2 S&P 500 earnings to rise 22% year-on-year, with AI infrastructure-related stocks contributing nearly 60%. However, this expectation is already quite high; the focus of the market has shifted from "Will cloud computing companies invest in AI?" to "How will companies actually invest in AI, and what is the return on investment?" The answer to this question will determine the trajectory of tech stocks over the next two quarters.

Chaoxiang Perspective

The rebound on Monday indicates that the market's confidence in technology has not collapsed, but is undergoing adjustments from previous high levels. However, the driving force of the rebound is not sufficient to support new highs, reflecting more of a repair from extreme pessimism to normal pessimism.

For bulls, the fundamental landscape of the AI investment cycle has not changed; the pursuit of productivity by enterprises will not stop, the probability of the U.S.-Iran conflict escalating into a full-blown war is low, and the 10-year U.S. Treasury is indeed cheap. But the problem is that the speed at which tech stocks rebounded from five consecutive declines to nearly new highs is too rapid. Such repairs are often a short-term bounce rather than a true bottom. The semiconductor inventory issue has not been resolved, and there is still no answer to the return on AI investment for enterprises. Although 0-DTE options traders were forced to close their positions on Monday, if the stock market rises again next week, they will short again.

This week's earnings calls will be a minefield. Stocks such as Nvidia, AMD, and Micron will detail clients' willingness to purchase AI. If major clients indicate in their conference call that AI spending will slow down or be delayed, tech stocks will plunge again, which is the real risk. It is not recommended to chase high this short term; rather, wait for earnings guidance before next Monday.