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AI Lifted Stocks Last Week. Now It’s Punishing Them
David Russell
January 27, 2025

AI news lifted stocks last week, but now it’s driving them lower.

The S&P 500 rose 1.7 percent in the holiday-shortened period between Friday, January 17, and Friday, January 24. It was the second straight positive week, establishing the index above 6,100 for the first time. The index gave back most of those gains this morning as technology stocks fell sharply.

President Trump announced a $500 billion initiative called Stargate to promote domestic infrastructure for artificial intelligence. The new president also said he will “demand that interest rates drop immediately.” He added China may face tariffs of just 10 percent, far below the 60 percent rate mentioned during his candidacy.

Those actions helped boost technology stocks and depress the U.S. dollar.

Earnings have also been strong so far. Eighty percent of companies have beaten estimates and stocks are rallying more than average on good news, according to FactSet. A separate weekly report from the American Association of Individual Investors showed the biggest improvement in sentiment since November 2023. (“Bullish” views rose 14 percentage points and “bearish” views dropped 11 points.)

Those two items suggest investors were negative about the stock market earlier in the month. They may have held more cash than normal, expecting a drop. But then the mood flipped quickly and now they’re scrambling to get back in. See last week’s story on the “wall of worry” for more.

However, attention shifted over the weekend to competitive threats after China’s DeepSeek AI outperformed U.S. technology. DeepSeek was reportedly built faster and more cheaply than American models, raising questions about IT-spending plans.

Widespread AI Gains

Biggest Gainers in the S&P 500 Last Week
Moderna (MRNA) +22%
Oracle (ORCL) +14%
Netflix (NFLX) +14%
Vistra (VST) +12%
Amphenol (APH) +11%
Source: TradeStation Data

Most of the big gainers in the S&P 500 last week had a link to AI.

Moderna (MRNA) surged after Larry Ellison said artificial intelligence could be used to create personalized cancer inoculations. The stock had fallen sharply on weak vaccine demand.

Oracle (ORCL), founded by Ellison, rallied after being included as a partner in Trump’s Stargate initiative. Nuclear-power company Vistra (VST) also jumped on the news given AI’s need for electricity.

Canaccord Genuity compared the situation to the build-out of communications infrastructure last century. The analyst said the U.S. needs to build nuclear plants and upgrade power grids.

Amphenol (APH) had its biggest weekly gain in almost five years after earnings and revenue beat estimates. The provider of communications and electricity cables and connectors cited “robust organic growth in the IT datacom,” which is associated with AI.

Seagate Technology (STX) ranked sixth on the S&P 500 last week. Strong AI demand helped the data-storage company report strong quarterly numbers.

Netflix (NFLX) also shot to a new record high after beating estimates again. Its subscriber base passed 300 million for the first time as the switch to ad-based plans continued to gain traction.

Zuckerberg’s Manhattan Project

“Meta is building a 2GW+ datacenter that is so large it would cover a significant part of Manhattan,” Meta Platforms (META) CEO Mark Zuckerberg said on Friday. The effort will cost $60-65 billion. It resembled news from Microsoft (MSFT) three weeks before that also revealed aggressive data-center investments to support AI.

A separate note from S&P Global noted that private-equity and venture capital investment in AI rose 93 percent to $56 billion last year. AI infrastructure was considered an especially fast-growing segment.

Other news mostly supported positive sentiment in the stock market. Oil declined for the first time in five weeks, making energy the only negative sector. Initial jobless claims were higher than expected, which helped calm interest-rate fears.

Global stocks and precious metals benefited from the weaker U.S. dollar. Gold had its highest weekly closing price ever. Communications stocks, healthcare and biotechnology also outperformed.

S&P 500, daily chart, with select patterns and indicators.

Charting the Market

The S&P 500 essentially moved sideways between the middle of October and the middle of this month. It then surged after inflation data on January 14 and 15 was lower than feared. Some chart watchers may view the price action as a period of consolidation with the potential for further upside. (See the boxes on the chart above highlighting similar patterns.)

Last week’s close above 6,100 could suggest another breakout is coming.

There have also been a series of successively higher lows each quarter since the current rally began in late 2023. Notice how the 50-day moving average has remained above the 100-day moving average. The 63-day rate of change, which shows trailing quarterly performance, has also remained positive. Such patterns may confirm a longer-term uptrend remains in effect.

Investors may also be encouraged by the strong profits cited above. (FactSet has noted that S&P 500 earnings are expected to return to double-digit growth this quarter for the first time since late 2021.)

Next, the 10-year Treasury yield is still below its 2023 peak and the U.S. dollar index stalled under its 2022 high. Lower yields and a weaker greenback are often associated with risk appetite.

The Week Ahead

Biggest Decliners in the S&P 500 Last Week
Electronic Arts (EA) -18%
First Solar (FSLR) -13%
CF Industries (CF) -9.2%
Albemarle (ALB) -9%
Expedia (EXPE) -8.6%
Source: TradeStation Data

This week is busy with economic news — including a Federal Reserve meeting — and earnings. It also marks the end of January.

Today brings new home sales and results from Sofi Technologies (SOFI) and AT&T (T).

Boeing (BA), General Motors (GM) and Starbucks (SBUX) are the big names tomorrow. Durable-goods orders are also due.

The Fed’s big announcement is at 2 p.m. ET on Wednesday, with Chairman Jerome Powell’s press conference 30 minutes later. Investors broadly expect policymakers to leave interest rates unchanged, but they will closely monitor the statement and Powell’s comments.

Wednesday also brings crude-oil inventories. META, MSFT, Tesla (TSLA), ServiceNow (NOW), Lam Research (LRCX) and ASML (ASML) report earnings.

Thursday features the preliminary estimate of gross domestic product (GDP) in the fourth quarter and initial jobless claims. Apple (AAPL), Intel (INTC), Visa (V) and Caterpillar (CAT) are some of the big companies issuing results.

Friday brings the personal consumption expenditure (PCE) price index — an important inflation report. Energy giants Exxon Mobil (XOM) and Chevron (CVX) also report.

Tags: ALB | APH | CF | EA | EXPE | FSLR | META | MRNA | NFLX | ORCL | STX | VST

About the author

David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.