AI Trade Roars Back as Crowd Chases the Rally

US stock futures are higher today. The AI trade is back in favor. Strong results from Palantir (PLTR) and a better tone around big-cap tech are driving the rebound. The Dow closed at a record high on Monday. The S&P 500 (SPY) broke above a key level at $760.40 in premarket trading. The Nasdaq 100 (QQQ) touched $707.79, near the 710 level traders have watched for weeks.

This rebound follows a brutal summer reset. Many traders sold stocks last week. Now they are chasing the market higher. The question is whether this rally can hold. Or will leadership stay narrow and vulnerable?

Global Social Sentiment

The online crowd is extremely excited. Fear and greed levels sit at 8.5 out of 10. That is high greed. Most traders are bullish. But many admit they missed the move. They panic-sold last week. Then they bought software and mega-cap names on Monday. Meanwhile, capital rotated into semiconductors and optical stocks. The crowd summarized it well: “you sold semiconductors to buy MSFT and META.”

This is a key difference. The crowd got the direction right. But they picked the wrong sectors. This shows weak discipline. If the market pulls back today, these traders may sell again quickly.

AI and Semiconductors Lead

Palantir (PLTR) is the star. Shares traded at $140.96, up 14.6% from last Friday. US government-related commercial revenue surged about 90% year over year. This ignited the whole AI complex.

Caterpillar (CAT) also crushed earnings. Quarterly sales exceeded $20 billion for the first time. Shares rose about 9% premarket. As the Dow’s second-largest weighted stock, CAT lifted the whole index.

The online crowd is now focused on Advanced Micro Devices (AMD) . AMD reports after the close tonight. Options imply a move of ±12.3% . The market is watching MI350 shipments and guidance for Helios rack orders. AMD closed Monday at $484. Bulls say AMD is the best way to play the semiconductor rotation. Bears point to history. AMD often rallies before earnings, then gives back gains after.

Optical Stocks Surge

A new theme is dominating social sentiment. The US is drafting a ban on Chinese data center devices. This includes optical modules. Chinese makers hold about 30% of the optical-transceiver market. A ban would shift that share to US suppliers.

Stocks like AAOI, COHR, LITE, and GLW moved sharply. The crowd calls this a “giant handout” to US optics. But some cautious voices warn that AAOI reports on 8/6 and COHR on 8/12 . The rally is based on expectations, not results. These stocks may reverse after earnings.

Key Risks

The market faces real risks. First, the AI trade is crowded. Hedge funds lost part of their year-to-date gains in July. Tech trades unwound quickly. This shows how fragile positioning can be.

Second, oil is bouncing. Iran and the Strait of Hormuz remain in focus. Brent is swinging around $81 . The US military has used “virtually all” of its long-range precision-guided missiles. A deal to reopen the strait could come Tuesday or Wednesday. But nothing is certain.

Third, Treasury yields are flat. Bonds are not confirming a major risk-on move. If oil stays high and yields stay sticky, the next leg of the market will look different from the first half of the year.

Fourth, SPCX reports tonight for the first time since listing. About 911.5 million shares worth $116 billion will be unlocked on 8/6 . That is a huge supply overhang. SPCX traded at $114.58 after hours, up 5.7% .

What to Watch

Watch AMD earnings tonight. The move will set the tone for semiconductors tomorrow. Watch optical stocks. The rally may be ahead of the news. Watch oil and the Strait of Hormuz. Any deal could change the risk picture quickly. Watch Treasury yields. If they rise, growth stocks may struggle. Watch the rotation. If the market broadens into cyclicals like energy and industrials, that is a healthy sign.

Bottom Line

The AI trade is back, and the crowd is euphoric. But this rally is still narrow and crowded. The online crowd got the direction right but missed the best sectors. That is a warning. Do not chase green screens. Focus on earnings quality and leadership. The market can grind higher if earnings hold. But one bad report or a spike in oil could end this party fast. Stay disciplined.

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Sources: market news brief & global social sentiment data. Updated 2026-08-04 20:45 HKT. For educational purposes only — not investment advice.