The report from Nvidia – the leading artificial intelligence chipmaker and the world’s most highly valued company – is viewed as a window into whether the appetite for spending on AI remains strong enough to support lofty valuations across the technology sector.
Nvidia shares closed up 1.3%, but after-hours trading was volatile after the company forecast second-quarter revenue above Wall Street expectations and announced an US$80 billion share buyback program.
Before the Nvidia report, the Philadelphia SE Semiconductor index had rallied 4.5% with big gainers including Astera Labs, up 17.7%, and ARM Holdings US traded shares, up 15%.
“Technology is driving the bus again today, and the AI theme. We’ve swapped back from yesterday’s concerns about rising rates and potential inflation and are leaning more into the all-things-AI story,” said Carol Schleif, chief market strategist at BMO Private Wealth in Minneapolis.
“It’s actually a little bit unusual because you would expect the market to sit pretty quiet waiting for Nvidia’s results later today. But there’s clearly a lot of optimism.”
The Dow Jones Industrial Average rose 645.47 points, or 1.31%, to 50,009.35, the S&P 500 gained 79.36 points, or 1.08%, to 7,432.97 and the Nasdaq Composite gained 399.65 points, or 1.55%, to 26,270.36.
The lack of a resolution to the US-Israel war on Iran had sent U.S. indexes lower in the last three days as investors worried that elevated oil prices would boost inflation enough to lead the Federal Reserve to raise interest rates.
On Wednesday, Iran’s foreign ministry spokesman said the exchange of messages between Iran and the US has continued. President Donald Trump said the US was willing to wait a few days for the “right answer” from Iran. Earlier Trump had said negotiations with Iran were in the final stages.
While investors are still monitoring fluctuating energy prices and inflation, Schleif said “they really want to look beyond what’s going on in the Middle East” and focus on the potential of AI.
Also supporting stocks was an easing in the benchmark 10-year Treasury yield on Wednesday after it rose for three straight days, touching a 16-month high.
Stocks gradually added to gains following the release of minutes from the Federal Reserve’s last meeting, which showed more officials saying the central bank should lay the groundwork for a possible rate hike. Bets for a Fed rate hike in December were choppy after the meeting and recently showing a 36.8% probability, down from 42% on Tuesday, according to the latest data from CME Group’s FedWatch tool.
Citing uncertainty around issues such as oil prices, tariffs and AI, Brian Jacobsen, chief economic strategist at Annex Wealth Management, said after the minutes that “it’s hard to take any of their forward guidance as more than just mere guesswork”.
Among the 11 major S&P 500 sectors, eight advanced on Wednesday with the biggest gains in consumer discretionary, up 2.5%. The second-biggest gainer was technology, which rallied 2.5%. On the flip side, energy dropped 2.6%.
Consumer staples slipped almost 1% with pressure from Target. Shares in the retailer sank 3.9% after it warned of a challenging macroeconomic backdrop even as it doubled its annual sales growth forecast. In sympathy, shares fell 2.5% in retail bellwether Walmart, which is due to report results on Thursday.
Falling oil prices boosted sentiment around airline stocks with Delta Air Lines, United Airlines, Southwest Airlines and Alaska Air advancing between 6% and 10%.
Cruise companies Carnival Corp and Norwegian Cruise Line Holdings led the discretionary sector’s percentage gains with both adding more than 8%.
Intuit shares declined 3.9% after Reuters, citing an internal memo, reported that the company is laying off about 3,000 employees.
Advancing issues outnumbered decliners by a 3.39-to-1 ratio on the NYSE, where there were 220 new highs and 119 new lows. On the Nasdaq, 3,711 stocks rose and 1,144 fell as advancing issues outnumbered decliners by a 3.24-to-1 ratio. The S&P 500 posted 19 new 52-week highs and 15 new lows.
On US exchanges 18.73 billion shares changed hands compared with the 18.55 billion moving average for the last 20 sessions.