Risk appetite returns thanks to CoreWeave earnings; BofA downbeat on S&P 500 outlook

U.S. stocks rose in early trading Wednesday as investors resumed buying after cloud computing provider CoreWeave posted strong quarterly results. The third-quarter report eased concerns about demand for AI infrastructure, giving investors more confidence that the AI rally has further to run. Even Nvidia shares rebounded. BofA, however, offered a more cautious outlook for U.S. stocks in 2027.

The broad-market S&P 500 rose more than 1% in the first minutes of U.S. trading. The tech-heavy Nasdaq 100 gained 2%, and the Nasdaq Composite advanced 1.7%. The blue-chip Dow Jones Industrial Average lagged, edging up 0.1%.

CoreWeave shares jumped 15%, lifting other neoclouds and AI infrastructure stocks. Nebius was up 12.5%, IREN 7%, Micron 6.5%, and Sandisk 9% as of this writing.

Even Nvidia, which came under pressure this week amid the scandal surrounding CEO Jensen Huang, climbed around 3%.

The S&P 500 may be a tough investment in 2027, warns Savita Subramanian, BofA’s head of U.S. equity and quantitative strategy, Yahoo Finance reports.

“We're not particularly bullish on the index,” Subramanian said. “I think the index itself is a bit risky because the other thing that I worry about is we've been in a 30-, 40-year period where we've seen S&P index inflows every year. We've never been in a market environment where the index has seen outflows.” She said that worries her because individual investors and asset owners alike are “fairly saturated in equities,” while the S&P 500 remains the world’s most crowded equity trade.

Subramanian warned that outflows could become a problem if investors need cash, for example to meet return obligations. “And that's where we see some risks to this thesis that the S&P 500 is just going to go up forever,” she added.

The S&P 500 has gained 10% year to date, outpacing the Dow Jones Industrial Average’s roughly 9% increase and the Nasdaq Composite’s 8% rise.

All told, investors have had a decent year, though it has not always felt that way, Yahoo Finance notes. The U.S. war against Iran sent oil prices surging to around $120 per barrel. Inflation began to pick up again, prompting the Fed to raise its benchmark rate to 3.75-4.00% in September. The Fed is likely to raise it further at its upcoming meetings. Traders see a 25-basis-point hike in December as all but certain.

At the same time, the unprecedented AI boom sent tech valuations and capex at hyperscalers, the largest providers of computing power, soaring throughout the first half of the year. The euphoria gave way to a downturn in autumn. The risk of a slowdown in construction of new data centers, the Democrats’ midterm election victory, and rapidly rising borrowing costs have driven a sharp contraction in valuation multiples and record selloffs in chipmakers and neocloud stocks.