The AI trade is officially back. After days of decline, artificial intelligence stocks staged a dramatic comeback Monday, with Nvidia surging 5.8% and dragging the entire sector higher. The rally comes as investors shake off valuation concerns and bet big on AI's continued market dominance, even as mixed earnings from GPU rental firm CoreWeave highlight the sector's growing pains.
The artificial intelligence trade roared back to life Monday, delivering the kind of sharp reversal that reminds investors why they fell in love with the sector in the first place. Nvidia led the charge with a commanding 5.8% surge, while Broadcom advanced 2.6% and Microsoft climbed 1.9% - finally snapping the software giant's brutal eight-day losing streak, its longest consecutive decline since 2011.
The rally couldn't have come at a better time. Just last week, whispers of an AI bubble were growing louder as investors questioned whether sky-high valuations could justify the massive capital expenditures flowing into the sector. But Monday's action suggests those concerns were premature, or at least temporarily shelved.
"AI-related stocks should drive equity markets," Mark Haefele, CIO of UBS's global wealth management division, told CNBC. That confident assessment comes even as fresh earnings data reveals the complex reality behind AI's explosive growth.
CoreWeave, the GPU rental company that's become a critical middleman in the AI economy, reported third-quarter results Monday that perfectly captured the sector's contradictions. Revenue exploded 134% year-over-year as companies like Google and Microsoft raced to secure processing power for their AI initiatives. Yet CoreWeave still posted a net loss and delivered guidance that fell short of Wall Street's expectations.
The numbers echo a familiar pattern across AI infrastructure. High growth, high burns, and high hopes - a combination that's become the sector's calling card since OpenAI kicked off the generative AI frenzy. CoreWeave's business model, which involves renting out Nvidia cards to AI firms, positions it as both beneficiary and bellwether of the broader AI investment boom.
But investors seem increasingly comfortable with that trade-off. The market's snap-back suggests growing confidence that AI companies will eventually translate their massive revenues into sustainable profits. It's a bet that's been paying off handsomely for those willing to ride out the volatility.
