Investors and consumers alike have had plenty to worry about in recent weeks. The on-again, off-again tariffs, the ongoing trade war with China, and persistent inflation have led to concerns about a potential recession.
The resulting market tailspin resulted in a market correction, which threatened to spread to a bear market. However, a double dose of good news this week fueled a broad-based market rally, which helped drive artificial intelligence (AI) and semiconductor stocks higher.
With that as a backdrop, AI specialist Palantir Technologies (PLTR 1.66%) surged 18% this week, semiconductor giant Broadcom (AVGO 0.52%) soared 16.8%, chipmaker Nvidia (NVDA +5.93%) jumped 13.3%, and chip designer Arm Holdings (ARM +13.63%) rallied 13%, as of 1:10 p.m. ET on Thursday.
Image source: Getty Images.
It's all about the tariffs
Lest I bury the lede, the biggest boost to stocks came Wednesday when the Trump administration announced a 90-day pause on the imposition of most new tariffs to allow for trade negotiations to go forward with 75 countries. The decision gave investors hope that the move might prevent a protracted and large-scale trade war, which many fear could spark a recession.
The news wasn't all good, as President Donald Trump escalated matters with China, increasing tariffs to 125% "effective immediately" citing a "lack of respect that China has shown to the world's markets."
NASDAQ: NVDA
Key Data Points
The 90-day pause marked a stark about-face from the Trump administration's position earlier this month. After initiating baseline tariffs of 10% across the board for many countries, the White House announced so-called "reciprocal tariffs" on 86 countries, which ranged from 11% to 84%.
Progress on the inflation front
There was more good news: The monthly report on inflation, which came courtesy of the U.S. Bureau of Labor Statistics, showed that inflation cooled somewhat last month, a welcome development for price-weary consumers. The Consumer Price Index (CPI), the most widely followed gauge of inflation, rose 2.4% in March compared to the year-ago period, down from 2.8% in February. Prices also decreased by 0.1% month over month.
NASDAQ: AVGO
Key Data Points
Both numbers came in below expectations, as economists predicted inflation to increase 2.6% year over year and 0.1% sequentially. The "core" data, which excludes volatile food and energy prices, was up 2.8% compared to this time last year and climbed 0.1% sequentially, which marked the lowest rate of core inflation in more than four years. The Fed continues to chase its stated goal of 2% inflation, but investors and consumers alike were thankful for signs of improvement.
In company-specific news, the Trump administration has dropped plans for an export ban on Nvidia's H20 chip, which was designed specifically to meet U.S. trade restrictions to customers in China. During a meeting with Trump last week, Nvidia CEO Jensen Huang negotiated the concessions after pledging to invest heavily in U.S. data centers.
A compelling opportunity?
The AI revolution has been in full swing, fueled by advanced semiconductors and cutting-edge AI models. The build-out to support AI has been notable, with some of the world's biggest technology companies planning an estimated $315 billion in capital expenditures in 2025, with the vast majority allocated to the servers and data centers needed to support AI.
The planned tariffs could significantly raise the cost of the semiconductors and other ancillary products that are key to data centers and other AI infrastructure, because many of the components needed come from countries that would be subject to the higher tariffs. The increased costs could threaten to put the brakes on the accelerating adoption of AI.
For their part, Palantir, Nvidia, Broadcom, and Arm Holdings have been among the biggest beneficiaries of this secular tailwind, providing the chips and AI expertise that are fueling the AI revolution. Palantir and Arm remain pricey at 154 times and 49 times forward earnings, respectively. However, Nvidia and Broadcom are attractively priced, selling for 26 times and 23 times forward earnings, respectively. This gives investors a rare opportunity to get these industry stalwarts at a discount.
