Trade Talks and Tech Resilience: Why Markets Are Rallying Amid Global Tensions

The U.S. stock market kicked off May 7, 2025, on a positive note as futures for the Dow Jones Industrial Average, S&P 500, and Nasdaq all rose, fueled by optimism around U.S.-China trade talks and easing Federal Reserve rate concerns. Nasdaq 100 futures surged 1%, outperforming broader indices, as investors bet on a thawing of trade tensions that could alleviate tariff pressures on tech supply chains.

The Trade Talks Catalyst

The announcement of high-level U.S.-China talks in Switzerland—led by Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer—sent a clear signal to markets: geopolitical risks may be moderating. Investors, weary of prolonged trade disputes, welcomed the possibility of reduced tariffs on key industries like semiconductors and AI hardware.

This sentiment was most evident in tech stocks, as Nasdaq futures led gains. The index’s heavy weighting in companies like AMD and Super Micro Computer highlights how trade dynamics directly impact their supply chains. For instance, reflect its struggle with U.S. export restrictions on AI chips to China—a headwind now potentially on the verge of resolution.

Earnings Season Adds Fuel to the Rally

The market’s upward momentum isn’t solely tied to diplomacy. Key corporate earnings reports are reinforcing investor confidence in sectors like tech and entertainment:

1. Disney’s Streaming Turnaround:
   The entertainment giant reported fiscal Q2 2025 earnings that smashed expectations, with Disney+ adding 1.4 million subscribers (vs. an expected loss) and revenue hitting $23.62 billion. Strong performance in theme parks and licensing deals for Marvel Rivals underscored resilience. reflects this turnaround, rising 8% premarket on the news.

2. AMD’s Dominant Data Center Play:
   Despite facing $1.5 billion in annual revenue losses due to U.S. export controls, AMD’s Q1 2025 revenue soared 36% year-over-year to $7.44 billion, driven by its EPYC processors and Instinct AI accelerators. CEO Lisa Su emphasized the upcoming MI350 AI chip’s potential, which could offset near-term headwinds.

3. Super Micro’s Struggles Highlight Sector Risks:
   Not all tech companies are thriving. Super Micro Computer’s Q3 earnings fell 66% year-over-year, with sales dropping 19% sequentially. CEO Charles Liang blamed delayed customer commitments tied to tariff uncertainty and pricing wars in AI server markets. The stock’s 6.7% post-earnings drop serves as a cautionary tale: even within a rising market, companies exposed to trade friction or intense competition face headwinds.

Fed Policy and the Road Ahead

The Federal Reserve’s decision to hold rates steady—already priced in by markets—allowed investors to focus on forward guidance. Chair Jerome Powell’s emphasis on “data-dependent” decisions reduced uncertainty around monetary policy, though traders remain wary of inflation risks.

For now, the market’s optimism hinges on three pillars:
- Trade talks easing tariffs on tech components,
- Corporate earnings proving resilience in key sectors like entertainment and semiconductors, and
- Fed stability keeping borrowing costs from stifling growth.

Conclusion: A Fragile but Focused Rally

The May 7 gains reflect a market balancing hope and caution. While trade talks and strong tech/entertainment earnings are driving momentum, vulnerabilities remain. Companies like Super Micro illustrate the fragility of supply chains under tariff pressures, while AMD’s export restrictions show that geopolitical risks aren’t fully behind us.

Investors should prioritize companies with diversified revenue streams (e.g., Disney’s theme parks and streaming) and those leveraging secular trends like AI (e.g., AMD’s data center dominance). Meanwhile, highlights tech’s leadership—a trend likely to persist if trade tensions ease further.

The rally is real, but its longevity depends on translating diplomatic signals into concrete policy changes. For now, markets are betting on the former.