Wall Street Holds Near Record Highs as Small Caps Rotate into AI, Energy, and Biotech Leaders

August 11, 2025 –
U.S. markets kicked off the week in a holding pattern, with major indexes treading water ahead of Tuesday’s closely watched inflation report. The Dow Jones Industrial Average rose ~0.2%, the S&P 500 held just shy of all-time highs, and the Nasdaq Composite slipped slightly as investors weighed potential Federal Reserve moves in the face of persistent price pressures.

Investor sentiment remains cautiously optimistic. The upcoming inflation print is expected to dictate the Fed’s policy tone for the remainder of the year, especially as tariff-driven costs ripple through supply chains. The stakes are high—any sign of sticky inflation could keep rates elevated longer, while a softer reading might open the door to policy easing.

Tech Trade Shock: Chipmakers Cut Deal with U.S. Regulators

In a move that sent ripples through the semiconductor space, Nvidia (NVDA) and AMD (AMD) agreed to give the U.S. government 15% of revenue from AI chip sales to China in exchange for export licenses. The unusual revenue-sharing deal was seen by markets as a pragmatic compromise, allowing continued access to a lucrative market while satisfying national security concerns.

Chipmaker stocks reacted positively in early trading, with the deal potentially setting a precedent for other tech hardware companies navigating geopolitical restrictions.

Small Cap Spotlight: Rotation into AI, Energy, and Biotech

While the large-cap indexes steadied, small-cap action was more selective. The Russell 2000 traded flat on the session, but beneath the surface, sector rotation was clear:

AI chip designers in the micro-cap space gained traction on sympathy plays following the Nvidia/AMD news.

Junior oil and gas explorers saw renewed buying interest as energy prices stabilized after last week’s pullback.

Early-stage biotech firms posted sharp gains, driven by positive trial updates and fresh analyst coverage.

However, some of last month’s speculative high-flyers faced profit-taking, with traders locking in gains and shifting capital toward names with fresh catalysts.

Market Outlook

With key inflation data due tomorrow, both institutional and retail investors are positioning portfolios for potential volatility. Large caps are likely to move in response to macro data, while small caps could see sharper, catalyst-driven swings.

For traders focused on the small-cap universe, today’s market showed the importance of being nimble—rotating into sectors with strong news flow while staying disciplined on exit strategies.

Bottom Line for SCN Readers:

Macro driver: Inflation data will dominate headlines and market direction tomorrow.

Small cap hot zones: AI, energy, biotech.

Trading tip: Watch sympathy plays in AI hardware and niche energy explorers for short-term breakouts.

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