Stocks Rally as AI Spending Surges

US stocks edged higher before the bell Wednesday, with Alibaba’s (BABA) ramped-up AI spending plans and Micron Technology’s (MU) earnings boosting sentiment around the sector.

Nasdaq 100 futures (NQ=F) rose about 0.3%, S&P 500 contracts (ES=F) gained 0.2%, and Dow Jones Industrial Average futures (YM=F) ticked up 0.1%.

The rebound comes after Tuesday’s slip, when losses among the “Magnificent Seven” tech giants snapped the market’s winning streak.

Alibaba jumped more than 9% in premarket trading after pledging to expand its AI investment beyond $50 billion, as its CEO warned that keeping pace is critical with global AI spending on track to hit $4 trillion. Micron added modest gains after posting stronger-than-expected results, another positive signal for the AI trade.

Still, rate-cut uncertainty capped broader gains. Fed officials have shown increasing division over policy, pointing to labor market weakness even as Chair Jerome Powell on Tuesday stressed a cautious approach. He also noted stocks remain “fairly highly valued.”

Investors are now focused on Friday’s release of the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index, for clues on whether two more cuts this year are realistic. In the meantime, housing data due Wednesday — mortgage applications and August home sales — will provide another read on the economy’s health.