What Happened?

A number of stocks jumped in the afternoon session after confidence in the artificial intelligence market was renewed, pushing both the S&P 500 and Nasdaq to new all-time intraday highs. 

The rebound was led by chipmaker Nvidia, whose shares rose nearly 2% after its CEO confirmed that demand for computing has "gone up substantially" in recent months. These comments helped reassure the market that the AI boom is supported by genuine demand, calming fears that were sparked a day earlier by a report questioning the profitability of Oracle's cloud business. The rally was strong enough to put the information technology sector on pace for a fresh closing high. This upward momentum occurred despite potential headwinds from an ongoing U.S. government shutdown, which entered its second week.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Electronic Components & Manufacturing company Rogers (NYSE: ROG) jumped 1.5%. Is now the time to buy Rogers? Access our full analysis report here, it’s free for active Edge members.
• Terrestrial Telecommunication Services company Lumen (NYSE: LUMN) jumped 2.2%. Is now the time to buy Lumen? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Lumen (LUMN)

Lumen’s shares are extremely volatile and have had 50 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 6 days ago when the stock gained 4.3% on the news that sentiment in the tech space improved, fueled by significant developments from OpenAI. 

OpenAI's valuation reportedly soared to $500 billion after a share sale, making it the world's most valuable startup and reinforcing investor confidence in the AI boom. Further fueling the rally, OpenAI announced partnerships with South Korean chipmakers SK Hynix and Samsung for its ambitious 'Stargate' project, a massive undertaking aimed at building AI infrastructure. This news created a positive ripple effect across the tech landscape, particularly for semiconductor companies, as it signals sustained, large-scale investment in the hardware that powers AI. The developments have bolstered the entire sector, pushing technology stocks to new records.

Lumen is up 25.4% since the beginning of the year, but at $7.04 per share, it is still trading 30.5% below its 52-week high of $10.12 from November 2024. Investors who bought $1,000 worth of Lumen’s shares 5 years ago would now be looking at an investment worth $694.52.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.