Quick overview

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Advanced Micro Devices  (AMD) saw its stock reach new all-time highs amid a rally among chipmakers. The excitement surrounding AMD’s agreement with OpenAI has significantly contributed to the enthusiasm for artificial intelligence, driving the market higher.

Meanwhile, bond values declined, and the dollar strengthened. Notably, the S&P 500 has been on a seven-day winning streak, the longest since May, fueled by renewed optimism in the stock market. Following the AI infrastructure deal, AMD’s stock increased by approximately 35%.

In contrast, rival chipmaker Nvidia Corp. saw its stock decline, while a closely monitored semiconductor index rose by 4%. The average price target for AMD is $187.73, suggesting an approximate 11.8% downside from its current price of $212.79, with targets ranging from $140 to $230.

Tech companies are investing hundreds of billions of dollars in data centers and advanced chips to keep pace with the rising popularity of chatbots like ChatGPT and Gemini. They are also preparing for a shift in economic activity from humans to machines. “The news this morning that AMD and OpenAI are forming a partnership worth tens of billions of dollars is undoubtedly a major catalyst,” stated Matt Maley from Miller Tabak. The week begins with renewed enthusiasm surrounding the AI boom.

However, Maley points out that unless this enthusiasm is sustained over a long period, it’s not surprising that the markets are overlooking issues such as the government shutdown. As the U.S. government shutdown enters its second week, the White House has intensified pressure on congressional Democrats, indicating that holdouts will be given another chance to approve the spending bill before mass layoffs of federal employees begin.

Longer-term Treasury yields have risen, alongside a surge in comparable Japanese debt, following Sanae Takaichi’s unexpected victory to lead the ruling party. This outcome has raised concerns that her pro-stimulus stance could result in increased debt issuance. Additionally, French bonds experienced a sell-off after criticisms arose regarding President Emmanuel Macron’s decision to form a continuity cabinet.