Inflation Moderates as Intel and Nvidia Fuel AI Trade

Global markets experienced significant momentum last week, driven by moderate inflation data from the United States and the strong impetus from artificial intelligence (AI) technologies. Consumer Price Index (CPI) data met expectations, easing concerns about interest rate hikes, while developments and robust financials from semiconductor giants Intel and Nvidia in the AI space boosted interest in technology stocks, leading to new records on Wall Street.

According to data released by the U.S. Bureau of Labor Statistics (BLS), the annual headline CPI for July 2026 decelerated to 3.4% from 3.5% in the previous month, indicating a moderation in inflation. Core CPI, excluding food and energy, also declined to 2.5% annually from 2.6%. This moderate trend reduced the probability of a Federal Reserve (Fed) rate hike in its September meeting from approximately 50% to 40%. The Federal Open Market Committee (FOMC) had kept the federal funds rate steady at 3.50%-3.75% for the fifth consecutive meeting on July 29, 2026.

Developments in the artificial intelligence sector were a primary driver of market gains. Semiconductor giant Nvidia (NVDA) saw its shares climb 3.9% on August 5, 2026, after SpaceX announced it would exclusively use Nvidia's chips to power its artificial intelligence systems. This development solidified Nvidia's leading position in the AI market, boosting investor confidence. Meanwhile, Intel (INTC) announced on August 10-11, 2026, plans for a common stock offering of $15 billion (later upsized to $20 billion) to fund its AI chip manufacturing and expansion goals. The company's Q2 2026 earnings report, released on July 23, showed Data Center and AI (DCAI) revenues surging by 59% and AI PC revenues increasing by 26% sequentially, highlighting Intel's robust growth in this area.

The moderation in inflation coupled with the AI initiatives from tech giants set the stage for a strong rally on Wall Street. The S&P 500 index and the Dow Jones Industrial Average (DJI) closed at record highs last week, while the Nasdaq Composite Index (IXIC) also posted significant gains. Robust corporate earnings and increased capital expenditures focused on artificial intelligence supported investor appetite, reinforcing the upward trend across the broader markets.

These developments somewhat alleviated pressure on the Fed's monetary policy, easing concerns about interest rates remaining high for an extended period. Artificial intelligence technologies continue to be a driving force for overall economic growth and productivity, while intense competition and high investment costs in the semiconductor sector also draw attention. Intel's large-scale capital increase, in particular, is seen as an indicator of the company's massive investments in AI infrastructure.

Analysts suggest that if the moderate inflation trend continues, the Fed might initiate its rate-cutting cycle sooner. However, some reservations exist regarding the sustainability of the AI rally and the concentration of market leadership in a narrow segment. Nevertheless, institutions like Bank of America have raised their expectations for CPU market growth to $210 billion by 2030, citing AI workloads, presenting a positive outlook for companies like Intel. In the coming period, the Fed's minutes and new economic data releases will play a critical role in determining the direction of the markets.