Software Rises, Nasdaq 100 Gains 0.6% on AI Cloud Deals

We anticipate the Nasdaq 100 (NDX) will close up 0.6% on Monday, driven by sustained enterprise spending on AI infrastructure and cloud software. The S&P 500 (SPX) is likely to add 0.3%. This bullish outlook stems from robust earnings expectations for technology companies and a continued push for digital transformation across industries.

The AI infrastructure buildout remains a powerful catalyst. Dell Technologies (DELL) is expected to report strong earnings and guidance after the close on Tuesday, with a 70% probability of beating EPS estimates. This suggests continued high demand for AI servers and related hardware, reinforcing the capital expenditure cycle benefiting companies like Nvidia (NVDA) and Broadcom (AVGO). Dell’s performance will offer a critical read on how quickly enterprises are deploying AI solutions, directly impacting other hardware and semiconductor names.

Enterprise software adoption, particularly in cybersecurity and cloud data platforms, is also contributing to the positive sentiment. Palo Alto Networks (PANW) reports after the close on Tuesday, with a 68% probability of exceeding expectations, driven by rising demand for advanced security solutions. Snowflake (SNOW) reports Wednesday after the close, carrying a 65% beat probability, indicating strong growth in cloud data warehousing. These results show that companies are prioritizing mission-critical software, even amidst economic uncertainty, underpinning the revenue growth of key players like Microsoft (MSFT) and Salesforce (CRM).

Not all corners of the market are benefiting equally. Nio (NIO), reporting pre-market on Tuesday, faces a 70% probability of an EPS miss, signaling ongoing margin pressure in the competitive electric vehicle market. Similarly, traditional retail names like Macy's (M), also reporting Tuesday, are likely to present mixed results, reflecting a more cautious consumer for discretionary items. These sector-specific headwinds are unlikely to derail the broader tech-led rally.

Our bullish thesis would be challenged by an unexpected, significant downturn in US ISM Manufacturing PMI on Monday. A print below 50.0, indicating contraction, combined with a sharper-than-expected decline in average hourly earnings from Friday's jobs report, could signal broader economic weakening and prompt a defensive shift, leading to profit-taking in growth stocks.