Oil and yields restrain Wall Street as Alphabet gains on AI chip report

U.S. stocks edged lower Monday afternoon after an early S&P 500 advance faded, with higher oil prices and rising Treasury yields weighing on equities, according to CNBC’s Investing Club. West Texas Intermediate crude traded above $83 a barrel during the session after briefly falling to about $80 earlier in the day, while the 10-year Treasury yield climbed back to roughly 4.6%.

The moves kept inflation and monetary policy in focus. CNBC’s Investing Club said market-implied probabilities of another Federal Reserve rate increase moved higher as investors considered whether firmer energy prices could revive inflation pressure. Higher oil can feed into headline inflation through fuel and transport costs, while higher bond yields raise the discount rate applied to future corporate earnings and can reduce the relative appeal of equities.

The equity market was also assessing whether a recent pullback in artificial intelligence-linked stocks had run its course or whether volatility in the group would persist, according to CNBC’s Investing Club. AI-related names have been central to market performance, leaving investors sensitive to both chip supply developments and company-specific news about model deployment and computing costs.

Alphabet rises after report on Google chip project

Alphabet shares rose after The Information reported Monday that Google is working on a new server chip intended to run its Gemini artificial intelligence models more efficiently. The reported chip, called Frozen v2, is not expected to be deployed until 2028, according to The Information.

The Information reported that Frozen v2 would not replace Google’s tensor processing units, or TPUs. CNBC’s Investing Club noted that those TPUs are co-designed with Broadcom. TPUs are custom accelerators built for machine-learning workloads, and companies use them to process large volumes of AI calculations at lower cost or energy use than more general-purpose hardware in some applications.

The reported Frozen chips could improve efficiency by producing more tokens for each unit of power consumed, according to CNBC’s Investing Club. Tokens are the pieces of data that AI models process when interpreting prompts and generating responses. For companies operating large AI systems, more tokens per watt can translate into lower infrastructure costs or greater capacity within the same power envelope.

CNBC’s Investing Club said the report underscored Google’s work on in-house silicon, which can reduce dependence on third-party accelerators such as Nvidia’s chips. The club also pointed to investor concerns around Alphabet’s AI position after the company lost high-profile AI talent and delayed its newest and most powerful AI model. It said projects such as Frozen v2 could help indicate continued investment in long-term AI infrastructure.

Earnings calendar turns busier Tuesday

There were no major after-hours earnings reports scheduled for Monday, according to CNBC’s Investing Club. A larger set of quarterly results was due before Tuesday’s opening bell, including reports from 3M, Danaher, Halliburton, Charles Schwab, General Motors, Novartis and Northrop Grumman.

Capital One was scheduled to report Tuesday evening, making it the first earnings release of the week among companies held in Jim Cramer’s Charitable Trust, according to CNBC’s Investing Club. The club said it viewed the release as an opportunity for the credit card company to show investors the value of its $35 billion Discover transaction.

No major U.S. economic reports were scheduled for Tuesday, according to CNBC’s Investing Club. That leaves investors focused on company results, energy prices and bond yields as immediate inputs for market pricing.

This story draws on original reporting from CNBC.