U.S. stocks were mixed Wednesday as investors paused ahead of earnings from Alphabet and Tesla, the first two Magnificent Seven companies to report this earnings season. The Dow Jones Industrial Average edged higher alongside the S&P 500, while the Nasdaq Composite fluctuated as traders weighed encouraging AI demand against geopolitical tensions and fresh tariff concerns.
The reports from Alphabet and Tesla are expected to provide the clearest test yet of whether Wall Street's enthusiasm for artificial intelligence remains justified. Investors will be looking for updates on AI spending, cloud demand, and capital expenditures after recent volatility in technology stocks.
Market Movers:
- Super Micro Computer (SMCI) +13%: Shares surged after the AI server maker raised its fourth-quarter gross margin outlook and announced a record backlog following more than $60 billion in new orders during the quarter. The results reinforced expectations that demand for AI server infrastructure remains exceptionally strong despite recent concerns about slowing investment.
- AT&T (T) +5%: The telecom giant gained after posting stronger-than-expected earnings, fueled by wireless subscriber additions and continued growth in its fiber business. Management also accelerated its share repurchase plans while reaffirming its free cash flow outlook for the year.
- Oklo (OKLO) and X-Energy (XE): Shares of the advanced nuclear developers moved higher after reports that both companies will participate in a federal initiative aimed at accelerating deployment of next-generation nuclear reactors to support growing electricity demand from AI data centers.
- Rocket Lab (RKLB) +4%: The aerospace company advanced after securing a $266 million U.S. government contract for multiple suborbital launches through 2028, adding to its growing backlog of defense and space-related business.
- Pegasystems (PEGA) -20%: Shares tumbled after the software company missed quarterly expectations and said rapid changes in the AI market are causing enterprise customers to delay purchasing decisions, slowing growth in annual contract value.
- Dyne Therapeutics (DYN) -8%: The biotech company declined after announcing an upsized public stock offering, with investors reacting to the potential dilution from the new share issuance.
- Reddit (RDDT) -6%: Shares fell following reports that the company has explored restricting Google's access to Reddit content for AI training and search, raising questions about future licensing revenue and traffic relationships.
- GE Vernova (GEV) -5%: Despite raising its full-year revenue and cash flow outlook, the energy equipment maker slipped after missing earnings expectations and warning that tariffs could add as much as $200 million in costs next year.
AI Infrastructure Optimism Returns
The biggest boost to market sentiment came from Super Micro Computer, whose results offered another sign that AI infrastructure spending remains robust. Record order growth and improving margins suggested demand for AI servers continues to outpace supply, easing concerns that technology companies might slow their investments.
The positive read-through extended beyond Super Micro. Dell shares also climbed as investors speculated that similar demand trends could benefit other server manufacturers, while AMD gained after announcing a multibillion-dollar partnership with Anthropic that includes future GPU deployments and a strategic investment.
Markets Balance Tech Optimism Against Global Risks
While AI-related news supported technology stocks, investors continued monitoring rising geopolitical risks and evolving trade policy. Oil prices remained elevated after another round of U.S. strikes in Iran, while concerns over global energy supplies persisted as tensions in the Middle East showed little sign of easing.
Trade also remained in focus after new tariffs targeting Brazilian imports took effect and the White House signaled additional duties could be implemented on certain imported products. Although the measures have yet to significantly impact markets, investors are watching closely for signs that higher tariffs could reignite inflationary pressures or disrupt global supply chains.
Looking Ahead
All eyes now turn to Alphabet and Tesla, whose quarterly results are expected to shape market sentiment for the rest of earnings season. Investors will be looking beyond headline earnings to gauge AI monetization, cloud growth, advertising trends, and capital spending plans, with management commentary likely to influence the broader technology sector.
As more megacap companies report over the coming weeks, markets will be watching whether strong AI demand continues to support elevated technology valuations. While Wednesday's gains suggest investors remain optimistic about the long-term outlook, earnings execution will likely determine whether the sector can sustain its recent rebound.