US Stocks Rise, but the AI Trade Splits Into Winners and Losers
The Fed held rates and the 10-year yield sat near 5%. Oracle jumped 10.73%, while Microsoft and Google drew opposite reactions to earnings.
Rates are unchanged. Why did stocks rise?
All four major US indexes rose on Oct. 28.
| Index | Close | Change |
|---|---|---|
| S&P 500 | 7,743.98 | +0.28% |
| Nasdaq | 26,549.85 | +0.27% |
| Dow | 52,475.10 | +0.19% |
| Russell 2000 | 2,830.51 | +0.41% |
| SOXX | $521.94 | +2.13% |
The major indexes gained only 0.2% to 0.4%, but the semiconductor ETF SOXX rose more than 2%. The pattern looks less like a new market-wide uptrend than like money concentrating in industries where earnings forecasts are improving.
The Federal Reserve held its benchmark rate at 3.75% to 4.00%. The vote was 10 to 2. The two dissenters wanted a 0.25-point increase. The Fed said economic activity is expanding strongly but inflation remains elevated.
The 10-year Treasury yield was about 5.05%. High yields still lower the present value of future earnings. The day's gains owed less to easier monetary policy than to expectations of better earnings at some companies offsetting the rate burden.
Chips were strong, but Nvidia fell
Memory and equipment makers led.
| Stock | Regular-session change |
|---|---|
| SK hynix | +13.30% |
| Micron | +5.86% |
| Lam Research | +5.39% |
| Applied Materials | +5.07% |
| AMD | +3.24% |
| Broadcom | +2.77% |
| Nvidia | -1.17% |
SK hynix's strong results and an outlook for tight memory supply lifted memory-related shares. The rise in equipment makers reflects hopes that high memory profits could translate into added capacity and process investment.
New equipment orders have not been confirmed, though. Nvidia's one-day decline is also hard to read as proof that AI demand is slowing.
A more likely reading is that even within the AI supply chain, shares are diverging by each company's profitability and stage of growth.
Why did Oracle surge 10.73%?
Oracle offered more than AI revenue growth. It laid out a specific timetable for recovering its investment.
Fiscal 2030 revenue target: more than $225 billion.
Fiscal 2029 free cash flow target: more than $30 billion.
Oracle also set goals of turning free cash flow positive in the second half of fiscal 2028 and funding growth from its own cash starting in fiscal 2029.
These are management projections, not reported results. Meeting them requires data center construction, customer demand, financing and utilization to go as planned.
Even so, the market responded well to a concrete path by which expanding AI investment could eventually generate cash.
Same AI earnings season, different reactions: Microsoft up, Google down
Results released after the regular session showed the gap between the two companies.
Microsoft reported fiscal 2027 first-quarter revenue of $92.279 billion and adjusted EPS of $4.89. Azure revenue rose 48% from a year earlier, and Microsoft Cloud revenue rose 30%. That is evidence that AI spending is turning into actual cloud revenue.
Google's third-quarter 2026 revenue was $127.6 billion, up 25% from a year earlier. Google Cloud revenue was $30.7 billion, up 103%. On cloud growth alone, the numbers are very strong.
But the market reacted more sharply to misses on total revenue and net income, pressure on search advertising growth, and cash outflow from rising investment. Google's quarterly free cash flow was a deficit of about $9 billion, and capital expenditure reached about $51.3 billion. The shares fell roughly 9% to 10% in after-hours trading.
The drop therefore cannot be read as a failure of Google's AI business. The cloud unit grew. But valuation of the whole company has become stricter, taking in heavy capital spending and shortfalls elsewhere.
FAQ
Q. The Fed held rates. Isn't that good news for stocks?
- A hold lowers policy uncertainty, but the possibility of a further hike and a long-term yield above 5% remain variables.
Q. Does Nvidia's decline mean AI chip demand is slowing?
- One day of relative weakness is not enough to show that. Customer orders, revenue guidance, margins and inventory trends need to be checked together.
Q. Why did Google fall even though cloud revenue grew 103%?
- Beyond cloud growth, expectations for overall results, search advertising, capital spending and cash flow were all priced in at once.
Q. Do AI chip companies keep the advantage?
- For now they can benefit from rising capital spending. But if customers are slow to recoup investment or cut orders for long, the strain could spread to suppliers.
On Oct. 28, the market did not abandon its expectations for AI growth. It looks more like a market that has begun to demand firmer evidence that growth turns into real profit and cash.
Insight Times Editorial Desk
