US stocks hold steadier a day after slumping on AI worries

U.S. stocks stabilized Tuesday following Monday’s decline, as investors received a reminder of artificial intelligence’s potential upside amid recent concerns about its disruptive impact across industries.

The S&P 500 edged up 0.1%, recovering slightly after Monday’s 1% slide. The Dow Jones Industrial Average gained 219 points, or 0.4%, while the tech-heavy Nasdaq composite rose 0.2% in morning trading.

Advanced Micro Devices emerged as a market leader, surging 7% after announcing a significant multi-year agreement to supply chips for Meta Platforms’ artificial intelligence initiatives. The deal includes provisions allowing Meta to purchase up to 160 million AMD shares for just 1 cent each, contingent on Meta’s chip purchase volume.

This partnership reignites some of the optimism that fueled market enthusiasm about AI’s transformative potential and the substantial investments flowing into the technology sector. Over the past couple of years, investors have poured billions into AI development, betting on its capacity to revolutionize productivity across the global economy.

However, market sentiment has recently shifted toward heightened scrutiny of AI’s potential downsides. Investors have begun aggressively punishing companies in various sectors—including software, logistics, and legal services—perceived as vulnerable to AI disruption. Tuesday’s positive reaction to the AMD-Meta partnership offers a counterbalance to these concerns.

IBM recovered some ground, rising 4.1% after suffering its worst single-day decline since 2000, when it plummeted 13.1% on Monday amid AI-related anxieties. These worries have extended beyond public markets into private equity, where concerns are mounting about the repayment prospects for loans made to software companies dependent on recurring revenue. Blue Owl Capital fell another 1.5% Tuesday, extending its year-to-date losses to 31.2%.

Beyond AI-related market movements, corporate earnings continue to influence investor sentiment. Keysight Technologies led the S&P 500 with an impressive 20% surge after exceeding analyst expectations for both profit and revenue in its latest quarter. The company also projected approximately 30% year-over-year revenue growth for the current quarter.

Home Depot shares climbed 2.7% after the home improvement retailer reported stronger-than-anticipated financial results despite what CEO Ted Decker described as “ongoing consumer uncertainty.” The company’s performance suggests resilience in the housing-related retail sector despite economic headwinds.

Cryptocurrency exchange platform Coinbase Global dropped 3.4% as bitcoin retreated below $64,000, now trading at roughly half its record price achieved in October. The decline highlights the ongoing volatility in cryptocurrency markets.

Meta Platforms, despite its significant AI partnership announcement with AMD, slipped 1.2%. As one of Wall Street’s largest companies by market capitalization, Meta’s movement carries outsized influence on major indices, particularly the S&P 500.

Overseas markets presented a mixed picture. European exchanges posted modest gains, while Asian markets displayed more significant volatility. South Korea’s Kospi jumped 2.1%, while Hong Kong’s Hang Seng index fell 1.8%. Mainland Chinese stocks, returning from an extended holiday break, rose 0.9%.

In the bond market, Treasury yields inched higher following a report indicating U.S. consumer confidence improved beyond economists’ expectations. The benchmark 10-year Treasury yield increased slightly to 4.04% from 4.03% the previous day.

The day’s market activity reflects the ongoing tug-of-war between AI’s promising potential and its disruptive risks, highlighting how technological advancement continues to reshape investment landscapes across sectors and geographies.