Wall Street marched to fresh records on Thursday as investors once again piled into technology stocks, brushing aside worries that would normally weigh heavily on markets. The S&P 500 climbed 0.72% to close at 7,498.10 while the Nasdaq Composite rose 0.86% to 26,628.07. The Dow Jones Industrial Average added 361 points, ending the session at 50,185.58 and edging closer to its own record territory.
At the centre of the rally stood Nvidia, the company that has turned itself from a graphics chip maker into the single most influential stock in financial markets. Shares rose nearly 4% after reports that the United States approved sales of Nvidia’s H200 artificial intelligence chip to around 10 Chinese companies. Investors reacted immediately. Nvidia’s market value surged towards $5.7 trillion, a figure so large it now bends entire stock indexes around it.
The move underlined how much of Wall Street’s momentum currently rests on one trade. Artificial intelligence spending has become the engine pulling technology stocks higher even as inflation remains stubborn and interest rates stay elevated. Under ordinary market conditions, three straight hot inflation readings in a week would have rattled growth stocks. Instead, investors bought more technology shares.
That divergence says a great deal about the present mood in markets. Investors appear convinced that demand for AI chips, data centres and computing power will continue regardless of higher borrowing costs or geopolitical tensions. Nvidia has become the clearest symbol of that belief.
The H200 approval carried wider importance than a simple export licence. The processor is Nvidia’s second most powerful chip and sits just below its top-tier products. Chinese companies had largely been blocked from accessing advanced American semiconductors following trade restrictions imposed by Washington. Allowing limited access to the H200 changes expectations around Nvidia’s future sales into China, one of the world’s largest technology markets.
Semiconductor shares rallied alongside Nvidia. The technology portion of the S&P 500 climbed more than 2% during the session, comfortably outperforming the rest of the market. Investors treated the export approval as another sign that AI spending remains intact despite political tension between Washington and Beijing.
The scale of Nvidia’s rise has become difficult to ignore. Earlier this year the stock slipped to around $165 a share during a broader market wobble. It has since climbed above $220. The company is due to release quarterly earnings next week and analysts expect revenue of roughly $78 billion. That figure would represent another sharp increase from the previous quarter, when Nvidia reported $68 billion in sales, mostly from its data centre business.
Yet even as the stock keeps climbing, there are signs of nervousness underneath the enthusiasm. Analysts have begun warning that investor expectations may have reached uncomfortable levels. The concern is not necessarily that Nvidia’s business is weakening. Rather, it is whether even strong earnings will satisfy a market that has become accustomed to spectacular growth every quarter.
That anxiety has recent precedent. Palantir, another company closely linked to artificial intelligence spending, recently reported a large jump in revenue only to see its shares fall sharply after results. Investors judged that the company had not exceeded already lofty expectations by enough margin. Nvidia now faces similar scrutiny heading into its earnings report on May 20.
Narrow market breadth raises fresh questions about Wall Street’s rally
Thursday’s rally was not limited to Nvidia. Cisco Systems produced one of the session’s largest gains after announcing plans to cut nearly 4,000 jobs while raising its revenue forecast for the year. Shares surged more than 14%, sending the company to a record high.
The reaction showed how investors are rewarding companies tied to AI spending, particularly those supplying data centre equipment and networking hardware. Cisco said demand from hyperscale data centre customers had strengthened, reinforcing the view that major technology firms continue pouring money into computing capacity.
The move also highlighted a broader change taking place inside corporate America. Companies are increasingly redirecting spending towards AI-related projects while trimming costs elsewhere. Investors have largely welcomed those decisions, especially when paired with stronger revenue forecasts.
Software shares also showed fresh signs of life. The S&P software index climbed 1.4%, an important move for a group that has lagged semiconductor stocks throughout much of the year. While chipmakers have dominated the AI rally, software firms have struggled to keep pace as investors focused heavily on hardware suppliers.
Some traders now believe software companies could begin catching up if businesses start spending more heavily on AI services rather than just computing hardware. That would widen the market rally rather than leaving it dependent on a small handful of semiconductor stocks.
Still, there are warning signs hidden beneath the headline numbers. Market breadth remains relatively narrow despite the record closes. On the Nasdaq, 104 stocks recorded fresh lows compared with 87 reaching new highs. That imbalance suggests gains remain concentrated in a limited number of large technology names.
Narrow rallies can continue for long periods, but they are often vulnerable when sentiment changes. If investors begin questioning valuations or if earnings disappoint, the concentration of gains in a few companies can leave markets exposed to sharper swings.
Economic data released this week has done little to calm inflation worries. Retail sales for April rose in line with expectations while jobless claims increased modestly. The economy continues showing resilience even as interest rates remain high. For the Federal Reserve, that creates a difficult balancing act.
Inflation readings earlier in the week reinforced expectations that rates may stay elevated through the end of the year. Bond yields climbed sharply after consumer and producer price reports came in hotter than economists expected. Under ordinary circumstances, rising yields would place pressure on technology stocks because higher borrowing costs reduce the present value of future earnings.
This time, investors appear willing to overlook that relationship. The AI trade has developed its own momentum, largely detached from concerns that once dominated market thinking. That does not mean inflation and bond yields no longer matter. Rather, it suggests investors believe AI demand is powerful enough, at least for now, to outweigh those concerns.
Geopolitics also continues hovering over markets. Relations between Washington and Beijing remain tense despite signs of progress in trade discussions between Donald Trump and Xi Jinping. Taiwan remains a source of friction while the conflict involving Iran continues feeding volatility in oil markets.
Higher oil prices have already complicated the inflation picture. Energy costs continue filtering through transport, manufacturing and consumer spending. Investors know those pressures have not disappeared, even as technology shares continue climbing.
The Nasdaq’s technical picture also reflects how finely balanced sentiment has become. Traders are watching the 26,223 level closely after the index closed near 26,628. A break lower could expose weaker support levels beneath the market. For now, however, momentum remains pointed upward.
