Stocks Defy AI Bubble Chatter as AMD Powers Rally: Markets Wrap

This content was published on October 6, 2025 - 22:15

11 minutes

(Bloomberg) — A rally in chipmakers sent stocks to all-time highs as Advanced Micro Devices Inc.’s deal with OpenAI added fuel to the artificial-intelligence frenzy that has powered Wall Street. Bonds fell. The dollar rose.

With the bull market on track for its three-year anniversary, momentum shows few signs of abating. The S&P 500 climbed for a seventh straight session – the longest advance since May. AMD soared 24%. While giant Nvidia Corp. slid, a key gauge of semiconductors jumped about 3%. Tesla Inc. led gains in megacaps as a series of social-media posts teased the unveiling of a product.

Subscribe to the Stock Movers Podcast on Apple, Spotify and other Podcast Platforms.

Monday’s AMD deal is the latest big-budget data center agreement this year. It follows last month’s announcement that Nvidia was planning to invest as much as $100 billion in OpenAI amid demand for tools like ChatGPT and the computing power needed to make them run.

“Semiconductors are ‘on fire’,” said Louis Navellier at Navellier & Associates. “The AI narrative continues to gain momentum.”

With “animal spirits” surrounding the AI phenomenon getting yet another boost, Matt Maley at Miller Tabak notes it’s no surprise that issues like the US government shutdown are being mostly ignored by traders.

The S&P 500 closed around 6,740. Comerica Inc. soared as Fifth Third Bancorp agreed to buy the bank for about $10.9 billion in stock. AppLovin Corp. sank as it was said to be probed over its data-collection practices.

Long-term Treasuries underperformed, joining a similar trend through much of Europe and Asia amid fiscal concerns. Gold neared $4,000-an-ounce. Bitcoin also hit a record. Oil gained as OPEC+ raised production by a modest amount.

For almost as long as the AI boom has been in full swing, there have been warnings of a speculative bubble that could rival the dot-com craze of the late 1990s that ended in a spectacular crash and a wave of bankruptcies.

There was some fear that an AI bubble had already popped in late January, when China’s DeepSeek upended the market with the release of a competitive AI model. But Silicon Valley remained largely undeterred. In the months that followed, tech companies redoubled their AI spending plans, and investors resumed cheering on these bets.

“When the tech bubble in the stock market inflated during 1999, we don’t recall as much chatter about a bubble as we are hearing today. From a contrarian perspective, it is comforting that there is a bubble in bubble fears,” said veteran Wall Street strategist Ed Yardeni.

The founder of Yardeni Research noted that the Google search index for “AI bubble” rose to 100 on Oct. 2 from zero in mid-September.

“We are counting on another better-than-expected earnings reporting season for Q3 over the next few weeks to support the stock market’s rally to record highs,” Yardeni said. “In addition, we expect that the AI and cloud companies won’t disappoint either.”

“Today’s lofty tech sector valuations differ in nature with the ‘irrational exuberance’ of the tech bubble of the 1990s and 2000s: capital expenditures have been funded out of free cash flows underpinned by high profitability,” said Naomi Fink at Amova Asset Management.

To Anthony Saglimbene at Ameriprise, it’s possible that some level of investment in the AI buildout today may not yield the degree of return investors hope for, and valuations among some of the leaders would likely need to be adjusted downward.

“However, given the size and scale of companies and industries that have yet to tap into AI in a meaningful way, we are less concerned that we are on the cusp of a dot-com bubble just yet,” he said.

US companies are set to enjoy a better-than-expected earnings season as a robust economy and a solid outlook for AI have left estimates looking too low, according to Goldman Sachs Group Inc. strategists led by David Kostin.

They also expect the so-called Magnificent Seven group of technology heavyweights to beat expectations.

At Ritholtz Wealth Management, Callie Cox says markets feel “untouchable,” which is why there are so many people talking about valuations.

“Higher valuations aren’t unusual, but earnings need to grab the baton for the rally to continue,” she said. “Ideally, we want to see profits support prices.”

“We’re in a self-fulfilling rally — earnings are strong and getting stronger, investors are shrugging off a lack of data, and even a government shutdown can’t shake their confidence,” said Mark Hackett at Nationwide. “And with half of the past decade’s returns typically coming in Q4, the main story right now is momentum.”

Bespoke Investment Group strategists noted that US investors will observe two notable milestones in coming days — Wednesday marks six months since the S&P 500’s hit this year’s lows, and Sunday is set to be the three-year anniversary of the current bull market.

The gauge’s rolling six-month change crossed above 30% for the first time since Oct. 2, 2020, Bespoke said in a note that analyzed the 12 days since 1953 when that happened for the first time in at least a year.

“In terms of forward market performance following the 12 days, the S&P has definitely shown some weakness in the very near term, but going out three months to one year, returns are slightly better than normal,” the strategists said.

A multi-month winning streak in US stocks is poised to continue based on an equity indicator from Barclays Plc that correctly predicted September’s rally in the face of concern over seasonal weakness.

The Barclays Equity Timing Indicator, which analyzes 19 inputs like market internals, positioning and economic data to find inflection points in the market, implies an 82% chance that the S&P 500 will advance in the next two months, with an average gain of 4% during that time, based on data going back to 2015.

“Another round of above-consensus results and positive takeaways around a resilient consumer could give investors a confidence boost heading into year-end amidst government uncertainty and a shaky labor market,” said Bret Kenwell at eToro.

Deutsche Bank’s Parag Thatte wrote that aggregate equity positioning remains overweight but not stretched, although there are growing pockets of momentum chasing in large caps.

Solid earnings growth and extreme valuations are calling for further broadening of the global equity rally, Citigroup strategists led by Beata Manthey said.

“We remain optimistic heading into the fourth quarter, particularly with macro tailwinds that are expected to lift the stock market. However, there are subtle signs of diverging momentum as we enter October that warrant vigilance, particularly with over-extended stocks that have risen substantially in recent weeks,” said Craig Johnson at Piper Sandler.

A brief consolidation or shallow pullback would be welcomed to set up better risk-reward opportunities, he said.

“As of now, the stock market is shrugging off the government shutdown, and is more focused on earnings optimism and the prospect of additional Federal Reserve rate cuts,” said Robert Edwards at Edwards Asset Management.

Corporate Highlights:

President Donald Trump said 25% duties on medium- and heavy-duty trucks would begin Nov. 1, the latest expansion of his tariff regime aimed at protecting domestic industries. OpenAI is making it easier for ChatGPT users to connect with third-party apps within the chatbot to carry out tasks, the company’s latest bid to turn its flagship product into a key gateway for digital services. Micron Technology Inc. climbed as Morgan Stanley upgraded the shares to overweight, saying the chipmaker is headed for multiple quarters of double-digit price increases. Apple Inc. faces an investigation in France over the use of voice recordings made with its assistant Siri. The US Supreme Court declined a chance to open social media companies to lawsuits over content recommended by their algorithms, turning away an appeal that accused Meta Platforms Inc.’s Facebook of radicalizing a man who killed nine South Carolina churchgoers. Boeing Co. is guiding suppliers that 737 Max output could reach a 42-jet monthly tempo as soon as this month, according to people familiar with its plans, highlighting growing optimism at the planemaker as it works to win approval for the move from US regulators. Verizon Communications Inc., conceding it has fallen behind rivals in wireless and broadband service, replaced its chief executive officer of seven years, appointing a new leader with experience in telecom and financial technology. The US Supreme Court turned away an appeal by ticketing giant Live Nation Entertainment Inc. in a consumer antitrust suit, dealing a blow to the company’s effort to manage its antitrust woes by channeling cases into arbitration. Paramount Skydance Corp. acquired the online news site the Free Press and named founder Bari Weiss editor-in-chief of CBS News, a move likely to stir controversy inside and outside of the news organization. Orsted A/S raised 60 billion Danish kroner ($9.4 billion) through a rights offering that’s critical for the company to tackle the downturn facing the wind power industry. Nvidia Corp.’s major server production partner Hon Hai Precision Industry Co. reported 11% growth in quarterly sales, signaling healthy demand for the chips and servers needed to develop artificial intelligence. “AI-related equity baskets are up by double digits this year, with the rally expanding beyond the Magnificent Seven into other parts of tech like memory chips and storage shares. That raises the stakes for these companies to deliver on results to keep justifying these gains and sparks concern about how long the momentum can last.”

— Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.

Some of the main moves in markets:

Stocks

The S&P 500 rose 0.4% as of 4 p.m. New York time The Nasdaq 100 rose 0.8% The Dow Jones Industrial Average fell 0.1% The MSCI World Index rose 0.3% Bloomberg Magnificent 7 Total Return Index rose 1.5% The Russell 2000 Index rose 0.4% Philadelphia Stock Exchange Semiconductor Index rose 2.9% Currencies

The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.3% to $1.1711 The British pound was little changed at $1.3482 The Japanese yen fell 1.9% to 150.33 per dollar Cryptocurrencies

Bitcoin rose 2.2% to $125,458.73 Ether rose 5% to $4,724.56 Bonds

The yield on 10-year Treasuries advanced four basis points to 4.16% Germany’s 10-year yield advanced two basis points to 2.72% Britain’s 10-year yield advanced five basis points to 4.74% The yield on 2-year Treasuries advanced two basis points to 3.60% The yield on 30-year Treasuries advanced five basis points to 4.76% Commodities