US stocks rallied on Monday, as a drop in oil prices tempered inflation fears and helped the S&P 500 rebound from its biggest weekly drop since April 2025, and tech shares jumped even as AI heavyweight Nvidia slumped with controversy swirling around CEO Jensen Huang.

Last week, stocks slumped after a sweeping victory by Democrats in the US midterm elections fed concerns that new regulations could dent the durability of the AI trade.

Markets were in rally mode even as Nvidia, the second-most valuable company in the world, tumbled over 4 percent and closed at its lowest level since April 7. Investors questioned CEO Huang's future at the AI chipmaker after an internal investigation was launched into whether a foreign intelligence effort had targeted him.

China has dismissed the spying allegation as a baseless smear.

"The AI story is not going away if people are worried about that, the Democrats are not going to destroy AI. They can't. It's got a life of its own. They can put regulation around it, but they're certainly not stopping it," said Ken Polcari, partner and chief market strategist at SlateStone Wealth in Jupiter, Florida.

Providing further support was a sharp drop in crude oil prices that helped dampen concerns about price pressures, as US President Donald Trump downplayed the likelihood of renewed strikes on Iran.

"Oil prices for sure, if they're down, that's certainly adding fuel to the fire," said Polcari.

The Dow Jones Industrial Average rose 1,104 points, or 2.2 percent, to 52,389, the S&P 500 gained 173 points, or 2.4 percent, to 7,549 and the Nasdaq Composite gained 673 points, or 2.7 percent, to 25,253.

The S&P recorded its biggest daily percentage gain since April 8, while the Nasdaq marked its biggest daily advance since July 30.

Inflation readings are on the docket this week as the US Labour Department will release its Consumer Price Index report for October on Tuesday and Producer Price Index on Friday.

Some analysts on Wall Street also viewed last week's decline as an overreaction. Morgan Stanley and UBS said last week's rout in AI stocks was overdone, and risks were low of extreme regulation of data centre developments, even with Democratic majorities in the US Congress.

Even as oil prices have eased, expectations for a rate hike at the Federal Reserve's December policy meeting remain above 80 percent, according to CME FedWatch, as October's strong jobs report gave the central bank latitude to continue raising rates.

Chipmakers surged. The Philadelphia Semiconductor Index shot up 6.9 percent after plunging more than 12 percent last week, its biggest weekly drop since the week ended April 4, 2025. Nvidia was the sole decliner in the index on Monday, while Broadcom, up 8.8 percent, and Advanced Micro Devices, up 13.3 percent, were the two biggest boosts.

Shares of investment giant KKR advanced 1.7 percent after its quarterly profit hit a record high. Constellation Energy, an energy firm with exposure to the AI buildout, shot up more than 10 percent after its adjusted third-quarter profit surpassed expectations. (Reuters)



Edited by Cecil Wong