AI Stocks Are Still Driving the Rally, But Oil May Decide What’s Next
Key Takeaways
- AI-related momentum remains strong, with semiconductors holding up despite NVIDIA’s pullback.
- A retreat in oil prices could lower yields and give stocks another boost.
- IPO enthusiasm is building again, with names like SpaceX, Anthropic, and OpenAI gearing up to trade on the indexes.
NVIDIA’s better-than-expected earnings weren’t enough to win over investors, but the optimism around a potential peace deal between the U.S. and Iran gave the stock market the push it needed. On Thursday, the major indexes closed higher, with the Dow setting a new record. Oil prices pulled back, and Treasury yields moved lower as well.
NVIDIA’s selloff didn’t drag down the semiconductor stocks. The VanEck Semiconductor ETF (SMH) bounced off its 21-day exponential moving average (EMA), and followed the bounce with two straight up days.
A move higher in SMH needs to be accompanied by a Relative Strength Index (RSI) above 70. The Percentage Price Oscillator (PPO), another momentum indicator, has come off its peak. If SMH continues higher with RSI and PPO moving higher, the ETF could reach new highs.
Oil’s Sideways Slide
Oil prices are still trading within a relatively wide range that has been narrowing. If the U.S. and Iran reach a deal, oil prices could retreat further. In the chart of Light Crude Oil ($WTIC) below, price is holding on to the support of its 50-day simple moving average (SMA).
A favorable outcome between U.S. and Iran could push oil prices below the 50-day SMA, but what happens below the average will be the more important tell. As you can see, oil prices are well above the levels before the war began. Will they quickly retreat to those levels? That’s something to watch for.
Quantum Stocks Get a Boost
The U.S. government announced its plans to award $2 billion in grants to nine companies in the quantum computing space. This sent stocks such as IBM, D-Wave, Quantum Computing (QBTS), Rigetti (RGTI), and Infleqtion (INFQ) surging higher. The Defiance Quantum ETF (QTUM) closed at an all-time high at $149.33, up +2.67%.
The RSI and PPO are moving higher, indicating that this ETF may still have more room to run. It may be worth considering a bullish trade in this ETF or in some of the individual names.
Meanwhile, In IPO Land …
SpaceX released its prospectus, and based on the numbers, it’s likely to be the biggest IPO ever. Last week, Cerebras (CBRS) started trading on the Nasdaq at $350. The stock has pulled back since then, but trading volume has been phenomenal.
Two other high-profile IPOs are on deck: Anthropic and OpenAI. If stocks continue to climb, the IPO market could see more waves of enthusiasm.
Closer to Home
Walmart (WMT) shares fell 7.27% after the company issued weaker-than-expected guidance for the full year and current quarter. The May consumer sentiment report is due Friday, and a weak reading could put more pressure on WMT’s stock price.
The RSI is at 35, indicating weakening momentum. If WMT tests its March low and bounces, that would be a good point to reassess the chart and decide whether a long position makes sense.
The Bottom Line
There are several exciting developments in the stock market right now, especially in AI-related stocks. This enthusiasm has helped push the major indexes to record highs. Geopolitical uncertainty is the main headwind, with oil prices appearing to be the market’s focal point.
If oil prices fall, investors may breathe a little easier. Treasury yields would likely move lower, and stocks could get another boost.
Markets shift fast. If you want to stay informed without refreshing charts all day, the Market Summary page keeps you grounded.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.
