The Nasdaq Composite reached a new record high, its first since June 2, closing up 2.26% at 27,122.09. This surge was primarily fueled by a renewed appetite for AI and semiconductor stocks, with investors seemingly shrugging off previous warnings from AI giants about system risks. The S&P 500 also gained 1.49%, closing at 7,764.70, just shy of its August 13 record, and the Dow Jones Industrial Average advanced 0.71% to 52,048.83.
Chipmakers led the rally, with Intel surging 12.2% and Arm Holdings jumping 17%. The PHLX Semiconductor Index gained 4.3%. Notably, Advanced Micro Devices (AMD) climbed about 10%, pushing its market capitalization above $1 trillion for the first time. Other significant movers included Meta, whose shares jumped 11.4% after Wells Fargo raised its price target following the launch of its Muse AI assistant. Apple gained over 3% after Wedbush raised its price target to $310 from $270, and Tesla was up more than 3% after Piper Sandler increased its price target to $500 from $400. Applied Materials was up over 3% after Morgan Stanley upgraded the stock to overweight with a $209 price target.
Beyond AI stocks, the broader market received a boost from falling energy prices and easing Treasury yields. Brent crude futures fell below $100 a barrel, and the benchmark 10-year Treasury yield moved back below 5%. These shifts were seen as turning headwinds into tailwinds for the market, as lower crude prices reduce inflation concerns and lower Treasury yields make equities more attractive relative to bonds. However, analysts note that the Federal Reserve's inflation concerns persist, with a 50% probability of another rate hike next month.
Despite the rally, market breadth was mixed, with advancing stocks outnumbering declining stocks in the S&P 500 by only 1.4 to one. While the S&P 500 recorded seven new highs, it also saw 29 new lows. The Nasdaq posted 64 new highs but also 127 new lows. Trading volume was relatively strong, with 16.5 billion shares changing hands on US exchanges, above the 20-session average of 16.2 billion. The current S&P 500 forward valuation stands at just under 19 times expected earnings, its lowest since 2023, yet much of the earnings growth is concentrated in AI-related tech companies, making continued AI investment crucial for sustaining the market's trajectory.
