Bargain hunting propelled a rebound on Wall Street, with semiconductor manufacturers leading the gains. Investors are betting that the artificial intelligence trading fueling this bull market still has room for further advancement.

At 9:30 a.m. New York time, the S&P 500 index was up 0.6%, the Nasdaq 100 index had gained 1.5%, and the Dow Jones Industrial Average advanced 0.4%.

Leading chip stocks staged a recovery following a recent sell-off that had pushed the sector into bear territory last week. A key industry index climbed 4.5%. The rally in tech stocks overshadowed persistent geopolitical risks, which continue to drive up oil prices and heighten market concerns that inflationary pressures could compel the Federal Reserve to raise interest rates.

A trading desk at UBS suggested that the sharp sell-off in momentum stocks may be nearing its end, creating an opportunity for investors to re-establish positions in artificial intelligence and semiconductor shares.

One reason the sector could be finding a bottom is that a significant amount of speculative positioning has already been unwound. Data from UBS's prime brokerage indicates hedge funds have cut their long positions in momentum and semiconductor stocks by an amount equivalent to roughly 5% of total market value, one of the largest reductions on record.

However, companies are under increasing pressure to justify their artificial intelligence spending. As questions mount over the hundreds of billions of dollars being poured into data center construction, investors will scrutinize corporate earnings reports over the next two weeks for evidence that these investments are yielding higher returns. The earnings season for major tech companies will kick off on Wednesday with reports from Tesla and Alphabet.