U.S. stocks opened higher Tuesday as investors attempted to recover from a sharp AI-driven sell-off, even as President Trump’s new 10% global tariff officially took effect. The rebound in major indexes reflects tactical dip-buying, yet the broader backdrop remains fragile: rapid advances in artificial intelligence are reshaping valuation models while renewed trade tensions threaten corporate margins and global supply chains.

AI Volatility Meets Selective Buying

The Dow Jones Industrial Average climbed roughly 0.9%, adding more than 400 points in early trading. The S&P 500 gained around 0.6%, while the Nasdaq Composite rose close to 0.9%. Technology shares led the bounce, with AMD surging as much as 10% after announcing a major GPU supply agreement with Meta to support the social media giant’s expanding AI infrastructure.

The rally follows Monday’s broad sell-off, where investors reacted to growing concerns that generative AI tools could disrupt large segments of corporate America, from consulting to enterprise software. IBM and other legacy technology names faced renewed pressure as markets reassessed the durability of traditional service models in a rapidly automating environment.

Tuesday’s gains suggest investors are drawing sharper distinctions between AI infrastructure beneficiaries and companies potentially vulnerable to automation-driven margin compression. For institutional portfolios, this marks a transition from indiscriminate enthusiasm to targeted positioning within the AI value chain.

Tariff Uncertainty Clouds the Recovery

Complicating the picture, President Trump’s 10% global tariff came into force Tuesday, raising fresh questions about trade stability. The European Union and Japan have protested the move, arguing it undermines previously negotiated arrangements. Reports indicate the White House is preparing a formal order to lift the rate to 15%, while exploring national security investigations into specific sectors that could trigger additional duties.

For multinational firms in the S&P 500, higher tariffs translate into potential cost pressures, pricing adjustments, and renewed supply chain recalibration. Investors are acutely aware that escalating trade friction could offset AI-driven productivity gains. Markets in both the U.S. and Israel — where many institutional investors maintain significant U.S. exposure — are particularly sensitive to shifts in global trade policy, given export linkages and tech sector integration.

Investor Psychology and the Next Catalyst

Anthropic’s virtual event unveiling updates to its Claude AI tools has further intensified scrutiny. Product launches from AI developers are now treated as macro catalysts, capable of influencing sector-wide valuations. This dynamic has contributed to what some strategists describe as an “AI volatility regime,” where narrative shifts can trigger outsized short-term moves.

At the same time, President Trump’s upcoming State of the Union address may offer critical signals regarding trade direction and economic priorities. Markets will parse not only policy specifics but also tone, searching for signs of escalation or moderation.

The coming sessions will test whether the current rebound represents stabilization or merely a pause within a broader recalibration. Investors should monitor corporate guidance revisions, hyperscaler capital expenditure trends, and developments in tariff implementation. If AI demand continues to justify infrastructure spending while trade tensions remain contained, equities may regain footing. However, a widening tariff regime or evidence of AI-driven margin compression could renew volatility, keeping risk management firmly at the forefront of institutional strategy.