TLDR
- Producer inflation came in hotter than expected, keeping pressure on the Federal Reserve to hold rates higher
- Morgan Stanley raised its year-end S&P 500 target to 8,000, up from 7,800
- AMD disclosed a small stake in Marvell Technology, drawing fresh attention to AI networking stocks
- Tower Semiconductor surged over 17% after announcing $1.3 billion in silicon photonics deals for AI data centers
- Alibaba’s cloud revenue jumped 38% year over year, though the company missed profit expectations
U.S. stocks had a mixed session on Wednesday as hot inflation data collided with strong AI earnings and fresh analyst upgrades. The market is caught between two forces: inflation keeping rate-cut hopes in check, and AI-driven results giving investors reasons to stay in.
Inflation Puts the Fed Back in Focus
The producer price index came in hotter than expected, raising fresh concerns that inflation is not cooling fast enough for the Federal Reserve to act.
Sticky inflation could delay rate cuts or even keep another hike on the table. That matters for stocks because higher rates put pressure on valuations, especially for growth companies.
Despite that, Morgan Stanley raised its year-end S&P 500 target to 8,000, up from 7,800, and set a 12-month target of 8,300. The firm cited strong corporate earnings, AI adoption, and pricing power as the reasons.
The upgrade shows that major banks still believe the earnings story can outrun the inflation risk for now.
The AI Chip Trade Keeps Spreading
Advanced Micro Devices disclosed a stake in Marvell Technology, owning 65,516 shares worth about $6.5 million as of the end of March. The position is small, but it drew attention to Marvell’s exposure to AI networking and custom silicon.
Marvell shares rose after the disclosure. The company is already tied to AI data-center infrastructure, and the AMD filing gave investors another reason to pay attention.
Tower Semiconductor was one of the biggest movers of the day. The Israeli contract chipmaker beat second-quarter revenue forecasts and announced $1.3 billion in silicon photonics deals tied to AI data centers.
Its U.S.-listed shares surged more than 17% in early trading. Silicon photonics uses light rather than electrical signals to move data faster inside data centers. Tower said it expects to ship chips under these deals in 2027.
The Tower story is part of a wider trend. Investors are looking beyond the biggest chip names and deeper into the supply chain, including photonics, custom silicon, and contract manufacturing.
Alibaba Beats on Cloud, Misses on Profit
Alibaba reported earnings that were mixed but leaned positive for AI investors. Overall revenue rose 3% to 243 billion yuan, a soft number. But its Cloud Intelligence Group posted 38% year-over-year growth, reaching 41.6 billion yuan.
The profit picture was weaker. Net income dropped as heavy AI investment weighed on margins.
Still, Alibaba’s U.S.-listed shares rose after the report. Management said AI-related cloud demand is growing fast and that the company is entering the commercialization phase of its AI strategy.
Chief Executive Eddie Wu said AI products now make up around 30% of the company’s external cloud revenue. He added that figure could exceed 50% within a year.
That forward-looking guidance was enough for investors to look past the earnings miss and focus on the cloud growth story.
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