The Federal Reserve keeps rates unchanged, US stocks finish higher: Chip stocks see a rebound, Nvidia gains 3%, Alphabet falls 7%, Disney jumps 10%

On May 7, 2025, the Federal Reserve kept interest rates unchanged, with Chairman Powell releasing a hawkish signal, but major U.S. stock indices closed higher. Chip stocks rebounded due to the Trump administration's potential easing of AI chip export restrictions, with Nvidia's stock rising 3.10%. Alphabet's stock plummeted 7.26% due to Apple's potential introduction of AI search features. Disney's stock soared over 10% due to strong earnings and expansion plans in the Middle East.

Fed Keeps Rates Unchanged, Market Stabilizes After Initial Volatility

The Federal Reserve (Fed) announced on Wednesday that it is keeping the benchmark interest rate unchanged in the range of 4.25% to 4.50%, in line with market expectations. The Fed's statement noted that although there are signs of slowing economic growth, inflationary pressures have not been alleviated, emphasizing a dual focus on inflation and unemployment risks. Chairman Powell stated at a press conference that the Fed is "in no rush to cut rates" and pointed out that economic uncertainty remains high.

Despite the hawkish policy stance, the market reaction was relatively stable. The Dow Jones Industrial Average rose 284.97 points, or 0.70%, to close at 41,113.97 points; the S&P 500 Index increased by 24.37 points, or 0.43%, to close at 5,631.28 points; the Nasdaq Composite Index rose 48.50 points, or 0.27%, to close at 17,738.16 points. The Philadelphia Semiconductor Index performed the strongest, rising 1.74% to close at 4,386.36 points.

Chip Stocks Rebound: Market Expects AI Chip Export Restrictions to Ease

Chip stocks were the highlight of the market that day. Reports indicated that the Trump administration is considering lifting AI chip export restrictions imposed during the Biden era, particularly the "AI Diffusion Rule" set to take effect on May 15. This rule was originally intended to limit U.S. companies from expanding AI data centers and chip exports, especially targeting China and some Middle Eastern countries.

The anticipation of this policy shift boosted chip stocks across the board. Nvidia (NVDA) shares surged in late trading, ending up 3.10% at $117.06. TSMC ADRs also rose over 1%, and AMD (Advanced Micro Devices) increased nearly 2%, closing at $100.36. The strong performance of the Philadelphia Semiconductor Index successfully offset the weak performance of other tech stocks.

Alphabet Plummets 7.26%, Tech Stocks Under Pressure

In contrast to the strong performance of chip stocks, Alphabet (GOOGL) shares plummeted 7.26%, closing at $151.38, making it the biggest drag on the tech sector for the day. Apple executive Eddy Cue publicly stated that Safari browser search usage saw its first-ever decline in April and revealed that the company is actively exploring the introduction of AI search features.

The market interpreted this move as potentially weakening Google's search engine dominance on Apple devices, thereby impacting Alphabet's advertising revenue sources. This news raised investor concerns about the future of Alphabet's search business, leading to a significant drop in its stock price and dragging down the tech-heavy Nasdaq Index.

Disney's Strong Earnings and Middle East Expansion Plan Boost Stock Over 10%

Walt Disney (DIS) was one of the day's standout performers, with its stock soaring 10.4% to close at $102.09. The company reported second-quarter earnings showing a 7% year-over-year increase in revenue to $23.6 billion, with net income reaching $3.28 billion, both exceeding market expectations. Adjusted earnings per share were $1.45, a 20% increase year-over-year, also higher than analysts' estimates of $1.21.

Additionally, Disney announced plans to open its first Middle Eastern theme park in Abu Dhabi, further expanding its international market footprint. The Disney+ streaming platform also added 1.4 million users this quarter, bringing the total to 126 million, indicating the continued success of its digital transformation strategy. These positive developments collectively boosted Disney's stock, significantly contributing to the Dow's rise.

Other Corporate Developments and Market Reactions

Apart from the highlighted stocks, other tech and consumer stocks had mixed performances. Uber (UBER) saw its stock fall over 2% to close at $83.65 due to quarterly bookings falling short of expectations. Marvell Technology (MRVL) plummeted over 8% to close at $56.31 after postponing its investor day and lowering its financial forecast. Super Micro (SMCI) shares fell 1.4% to close at $32.48, despite slightly better-than-expected earnings, because of a poor full-year outlook.

On the other hand, Novo Nordisk (NVO) shares rose nearly 2% to close at $67.55. Although the company lowered its sales forecast for the weight-loss drug Wegovy, it remains optimistic about growth potential in the U.S. market.

The Federal Reserve keeps rates unchanged, US stocks finish higher: Chip stocks see a rebound, Nvidia gains 3%, Alphabet falls 7%, Disney jumps 10%

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