S&P 500 Adds 0.4% as Chip Demand Drives Tech

We expect the S&P 500 to close up by 0.4% tomorrow, driven by continued strength in the technology sector as demand for advanced chips and AI-related infrastructure remains firm. The Nasdaq 100 will see a 0.7% gain. Recent reports on enterprise spending indicate that the AI buildout is accelerating, directly benefiting companies like Nvidia (NVDA) and Taiwan Semiconductor Manufacturing (TSM).

The primary driver is the unabated demand for artificial intelligence capabilities across industries. This translates into consistent order flows for high-performance graphics processing units (GPUs) from Nvidia (NVDA), which continues to lead the market. Nvidia (NVDA) is likely to rise by at least 1.5% as investors position for strong revenue growth from data center expansion. Similarly, Taiwan Semiconductor Manufacturing (TSM), the leading foundry for these chips, will see its stock climb by 1.2% or more, reflecting high utilization rates and robust forward guidance. The implications extend to the broader semiconductor ecosystem, with companies like ASML (ASML), which provides crucial lithography equipment, also seeing upward momentum.

Supporting this technology surge is the resilient capital expenditure by major cloud providers and enterprises. Microsoft (MSFT), with its Azure cloud services, is a direct beneficiary of this trend, and we anticipate a gain of at least 0.7% for the stock. This consistent investment in digital transformation and cloud infrastructure underscores a durable economic tailwind for large-cap technology. Broadcom (AVGO), another key player in networking and custom AI chips, will also likely see gains around 0.8% as its diversified portfolio captures various aspects of this infrastructure boom.

While technology leads, the consumer sector shows selective strength. McCormick & Company (MKC) reports Q3 earnings pre-market. We place a 70% probability on MKC beating consensus EPS, which would signal sustained consumer staple demand and efficient cost management, potentially lifting the broader consumer staples sector. This provides a foundational stability that allows for growth in more cyclical sectors, particularly technology.

The main risk to this outlook would be an unexpected hawkish shift in central bank rhetoric over the weekend, leading to a spike in 10-year Treasury yields, which could quickly dampen enthusiasm for growth stocks. However, in the absence of such a catalyst, the momentum in AI-driven technology spending will dominate the session.