Nasdaq 100 and S&P500: AMD–Meta Deal Lifts Tech as Software Stocks Stage Recovery

U.S. Equities Recover After Monday’s Steep Losses

Following huge losses suffered on Monday, U.S. Equities were able to recover Tuesday with the S&P 500 up 0.52%, the Nasdaq Composite up 0.85% and the Dow Jones Industrial Average Up 353 Points, or 0.73%. This increase was primarily due to an increase in semiconductor firms and software names, but there was still a cautious tone amongst traders as additional tariffs and rising geopolitical tensions weighed heavily on traders.

AMD and Meta Strike a Multiyear AI Infrastructure Deal

AMD had a tremendous day on Tuesday with the announcement that Meta, formally known as Facebook, entered into a multiyear agreement with AMD to use AMD’s GPUs to build out its AI data centers with up to 6 gigawatts of power under a performance-based warrant (granted to Meta) that could allow Meta to purchase up to 160 million shares of AMD. This comes on the heels of Meta’s announcement last week that it is deploying millions of Nvidia GPUs in its buildouts, but the fact that Nvidia dropped 1% Tuesday suggests that investors see AMD as taking away market share from Nvidia in terms of the AI infrastructure market.

Software Stocks Jump as Investors Brace for AI Disruption

In my opinion, the major indices were also boosted by a substantial jump in several software-related stocks. Salesforce and ServiceNow both had 3% increases while the iShares Expanded Tech – Software Sector ETF (IGV) gained 2%, but it is still over 30% lower than its 52-week peak.

According to Mizuho’s traders, retail clients are positioned on the sidelines, waiting for potential new product announcements related to A.I., noting that every time news items about Anthropic are released, it has been interpreted as further competition for legacy applications, regardless of whether or not that is the case. This cautious view contributes to the smaller amounts of momentum that caused the upturn to be less than aggressive.

Earnings Season Reveals Clear Winners and Losers

I also think that today’s earnings results have made clear the splits in different sectors. For example, Home Depot beat expectations for its fourth quarter by reporting better EPS and revenue. This news caused Home Depot’s stock to jump 2.7%.

Meanwhile, Keysight Technologies saw a huge gain, with its stock surging 15% after reporting better earnings per share and revenue. Conversely, Hims & Hers Health saw its stock fall nearly 7% after issuing first quarter revenue guidance, which was below the FactSet consensus of $653 million, also lower than LSEG guidance.

Finally, Diamondback Energy’s stock declined 3% following the release of lower than expected adjusted earnings.

Tariffs and Geopolitical Tensions Keep Traders on Edge

In economic news, we believe the 10% tariff imposed by the U.S. has raised concerns and speculation about how it will affect other economies. With President Trump’s announcement that he may raise the tariff to 15%, many investors are uncertain how to proceed and have adopted a risk-averse stance.

Additionally, the ongoing tension between the U.S. and Iran further complicates this uncertainty. What this means is that cautious buying will be the theme until there is more clarity about the impact of the new tariffs. Of particular concern are the responses from China and Europe.

Upside Remains Limited as Tariff Risk Dominates the Outlook

In addition to the broad-based indexes, we’re looking at the next layer of indicators to see if we can find an early trend. Energy (-0.65%) and Financials (-0.79%) were the worst-performing sectors on Tuesday, while Technology (+0.61%) and Consumer Discretionary (+0.64%) were the top-performing sectors for the day. As such, dip-buyers (investors buying on dips) are still apparent throughout the market, as evidenced by the numerous AI-related hardware companies, along with a large number of software companies.

However, we think that because the comprehensive application of tariffs appears imminent and it seems likely the level of tariffs will be raised, upside potential in these sectors will be very limited in the near term.

On top of the continuing tariff phenomenon affecting risk sentiment, traders should closely monitor analyst revisions of future earnings guidance, as illustrated by Hims & Hers and ONEOK lowering their full year earnings per share estimates and how these changes will affect markets’ sentiment as they adapt to changes in forecasts for future earnings.

More Information in our Economic Calendar.