Markets Edge Higher as AI Stocks Rally, Oil Falls Below $90, and Investors Reassess Fed Rate Expectations

Global markets traded higher on Thursday as investors returned to technology and AI-related stocks while falling oil prices helped ease some of the inflation concerns created by the ongoing tensions around the Strait of Hormuz.

U.S. equities remained close to record levels, with the S&P 500 and Nasdaq supported by strength in semiconductor and AI infrastructure companies. European and Asian markets also advanced, particularly in Japan and South Korea, where chip-related stocks benefited from renewed investor demand.

The broader tone remains constructive, although geopolitical uncertainty and elevated valuations continue to limit the strength of the rally. Investors are increasingly focused on whether the combination of resilient corporate earnings, moderating inflation, and stable interest-rate expectations can support another leg higher in equities.

Markets

Technology and artificial intelligence remained the strongest areas of the market. Semiconductor stocks led gains across Asia and the United States as investors continued to increase exposure to companies benefiting from the rapid expansion of AI infrastructure.

Recent corporate results have reinforced the view that demand for AI computing remains exceptionally strong. CoreWeave's latest results and increased capital-expenditure outlook provided another indication that data-center investment continues accelerating, although the scale of spending is also increasing scrutiny over financing requirements and future returns.

The market is therefore becoming increasingly selective. Strong AI exposure alone is no longer enough; investors are looking for companies that can demonstrate sustainable revenue growth, strong margins, and a credible path toward generating returns from the enormous amount of capital being invested in AI infrastructure.

Stocks & Earnings

The macroeconomic backdrop became somewhat more supportive for equities after weaker U.S. economic data reduced expectations of a Federal Reserve rate hike in September.

Markets are now pricing a greater probability that the Fed will keep rates unchanged at its September meeting, with expectations shifting significantly over the past 24 hours. This has helped support technology stocks and other rate-sensitive assets.

At the same time, the latest U.S. inflation data remained broadly consistent with expectations, reducing fears of a renewed inflation shock. Investors are now turning their attention toward upcoming producer-price and economic activity data for additional confirmation that inflation is continuing to moderate.

The U.S. dollar strengthened to a two-week high, while Treasury markets remained relatively stable as investors reassessed the future path of monetary policy.

Business & Macro

Cryptocurrency markets remained relatively steady as the broader risk environment improved. Bitcoin continued to trade close to recent highs, while Ethereum and other major digital assets benefited from renewed interest in technology and growth assets.

Institutional investors continue to favor AI, semiconductor, and technology-focused ETFs, reflecting strong conviction in the long-term artificial intelligence investment cycle. Spot Bitcoin ETFs remain an important source of institutional demand for digital assets, although crypto continues to be highly sensitive to changes in liquidity and interest-rate expectations.

The current environment is therefore relatively supportive for digital assets, but any renewed inflation pressure or sharp increase in bond yields could quickly reduce risk appetite.

Crypto & ETFs

The Strait of Hormuz remained the most important geopolitical risk for global markets. Peace negotiations between the United States and Iran remain stalled, with both sides continuing to accuse each other of blocking progress toward reopening the critical shipping route.

Despite the uncertainty, oil prices fell below $90 per barrel as markets increasingly focused on weaker global demand expectations and rising crude inventories. The decline in oil prices provided some relief to investors because a sustained increase in energy costs would complicate the inflation outlook and make it more difficult for central banks to ease monetary policy.

The situation remains highly fragile, however. Any escalation around Hormuz could quickly reverse the decline in oil prices and put renewed pressure on global equities.

Geopolitics

Investors will closely monitor several important developments:

U.S. producer-price and additional inflation data.

Federal Reserve expectations following the latest economic releases.

AI and semiconductor stocks following the recent earnings strength.

CoreWeave and other AI infrastructure companies' capital-expenditure plans.

Oil prices and developments surrounding the Strait of Hormuz.

Treasury yields and the U.S. dollar.

Bitcoin and Ethereum performance alongside institutional ETF flows.

What to Watch Today

Markets remain in a constructive position as AI stocks continue to lead the rally, while falling oil prices and softer economic data are reducing some of the pressure on inflation and interest-rate expectations. The biggest risk remains geopolitical: the unresolved situation around the Strait of Hormuz could quickly push energy prices higher again. For now, however, investors are increasingly betting on a combination of resilient corporate earnings, strong AI demand, and a Federal Reserve that may have less reason to tighten policy further.

Bottom Line