AI Stocks Pick Up Steam—and the Nasdaq Tests Records—Ahead of Big Tech Earnings

• The Nasdaq opened at 23,986, near its October record of 23,958.47, as semiconductor and chip equipment stocks rallied on surging demand for AI infrastructure
• ASML Holdings reported record quarterly orders as chipmakers like TSMC dramatically increase investments, while Corning secured fiber optic supply deals with Meta for data centers
• High expectations pose risks as some AI-related stocks underperformed despite beating estimates, with investors closely watching whether Microsoft and Meta can demonstrate returns on their increased AI spending

Market Summary: AI Stocks Rally as Nasdaq Approaches Record High

Key Market Movement:

The Nasdaq Composite surged 0.7% at Wednesday's open, reaching 23,986—just below its record closing high of 23,958.47 set in late October. The index has nearly recovered losses from late 2024 when AI bubble concerns weighed on tech stocks.

Primary Catalysts:

Strong earnings from AI infrastructure companies drove the rally. ASML Holdings, a chipmaking equipment supplier, reported record quarterly orders as customers like Taiwan Semiconductor Manufacturing (TSMC) expanded investments. TSMC previously reported strong results and announced plans to dramatically increase infrastructure spending to meet AI demand.

Sector Performance:

• Semiconductors: Chip manufacturing equipment suppliers including Lam Research and Applied Materials rallied on surging demand
• Memory/Storage: Micron Technology and Western Digital benefited from supply shortages
• Infrastructure: Corning soared 16% Tuesday on a deal to supply Meta with fiber optic technology for data centers

Mixed Signals:

Despite positive fundamentals, high expectations created volatility. GE Vernova and Amphenol posted strong results but traded mixed, with Amphenol becoming the S&P 500's worst performer despite beating estimates. Both stocks had risen sharply (140% and 90% respectively) heading into earnings.

Critical Test Ahead:

Microsoft and Meta report after Wednesday's close. Investors seek confirmation that massive AI infrastructure investments are generating returns, not just driving supplier revenues. Both companies indicated plans to maintain elevated AI spending in 2025.

Market Implication:

The AI rally's sustainability hinges on whether Big Tech can demonstrate tangible returns on infrastructure investments, potentially reviving or dismissing AI bubble concerns.