US stocks gain as Amazon and Microsoft soothe AI investment fears
US equities advanced after major technology companies defended their artificial intelligence capital expenditures, easing investor fears that massive infrastructure outlays are failing to generate timely returns.
US markets closed higher on Friday as major technology companies provided reassurance on their artificial intelligence strategies. This rally countered recent market anxiety over prolonged payback periods for heavy tech infrastructure investments.
Jake Dollarhide, CEO of Longbow Asset Management, addressed the market skepticism directly. "There were worries that Amazon's spending was just moonshot spending, that it's irresponsible spending, and (CEO) Andy Jassy just put those fears to bed," he said.
The PHLX chip index gained, but it remains down over 20 percent from its June 22 record high close. Microsoft added to its gains after surging over 15 percent on Thursday, marking its biggest one-day percentage gain since 2008, following a forecast of stronger-than-expected cloud growth. Monolithic Power Systems also rose after forecasting third-quarter revenue above estimates.
Conversely, Apple shares tumbled following a warning that supply constraints would impede growth. This exacerbated existing investor concerns that recent iPhone price increases might ultimately weaken consumer demand.
The Apple slump weighed on the broader S&P 500 technology index, even as other tech names rallied. Preliminary data shows the S&P 500 is nearly flat in July and the Nasdaq has declined approximately 3 percent. Both indexes remain up about 9 percent for 2026.
Notably, the S&P 500 equal-weighted index is positioned for its fourth consecutive month of gains. This divergence highlights the recent underperformance of heavyweight AI-related stocks, which have less influence on the equal-weighted benchmark.
These equity moves unfold against a shifting monetary policy backdrop. Three Federal Reserve officials, who dissented at this week's policy meeting in favor of a rate increase, publicly called for immediate action to return inflation to the central bank's 2 percent target.
Reflecting these dynamics, the two-year US Treasury yield rose 5.4 basis points to 4.28 percent, though it remains slightly lower for the week. According to CME FedWatch, markets currently price in a 65 percent probability of a rate hike at the September meeting.
In other corporate news, domain registrar GoDaddy saw its shares drop. The decline followed the company's decision to narrow its annual revenue forecast.
