The S&P 500 and the Nasdaq finished at record closing highs on Tuesday as investor enthusiasm around artificial intelligence helped offset concerns tied to Middle East diplomacy and recent U.S. military action. Semiconductor companies led the advance, driven by strong expectations for AI-related demand.
Micron was a standout, jumping 19% after UBS raised its price target on the stock from $535 to $1,625. That move propelled Micron to a market valuation of $1 trillion for the first time.
Broad optimism in technology and chip names came even as the region remained unsettled. Reports of U.S. strikes in Iran and ongoing negotiations on ending the conflict continued to make headlines, but remarks from U.S. officials provided some comfort to markets. According to the reporting, U.S. Secretary of State Marco Rubio said a deal with Tehran to halt the conflict could "take a few days," while Iran’s Tasnim news agency indicated Tehran was seeking the release of $24 billion in Iranian funds frozen overseas.
Market participants pointed to a strong earnings backdrop and renewed conviction in AI-driven trade as primary drivers of the rally. One market strategist noted that current tech rallies evoke memories of late-1990s technology strength, while also suggesting that lessons from the prior tech bust could influence how investors approach this cycle.
From a macro perspective, some investors argued that earnings growth expectations remained robust despite elevated inflation and geopolitical uncertainty. "Even though we don’t have an end of the war yet, there’s a very high likelihood the situation will resolve itself in a peaceful fashion sooner rather than later," said Adam Sarhan, chief executive of 50 Park Investments. He added that earnings are expected to grow even with high inflation and that the market broadly reflects economic growth dynamics.
Index moves were mixed on the session. The Dow Jones Industrial Average slipped 118.02 points, or 0.23%, to 50,461.68. The S&P 500 gained 45.65 points, or 0.61%, to close at 7,519.12. The Nasdaq Composite added 312.21 points, or 1.19%, to finish at 26,656.18. The S&P 500, the Nasdaq and the Russell 2000 all reached intraday record highs, underscoring the breadth of the rally at points during the day.
Commodity markets reacted to the geopolitical developments as well. Brent crude futures climbed about 4% after the U.S. military carried out strikes in Iran, a move that added to uncertainty over the timeline for any agreement to end the conflict and the potential reopening of shipping flows through the Strait of Hormuz.
Within the semiconductor space, several names posted notable gains. Qualcomm rose nearly 4.5% after a report that it had reached a deal with ByteDance to supply chips, while Marvell Technology finished about 6% higher. The Philadelphia SE Semiconductor Index hit an all-time high, advancing 5.5% on the session.
Market breadth was positive. On the New York Stock Exchange, advancing issues outnumbered decliners by a 2.47-to-1 ratio. There were 627 new highs and 90 new lows on the NYSE. On the Nasdaq, 3,078 stocks rose and 1,785 fell, with advancing issues outnumbering decliners by a 1.72-to-1 ratio. The S&P 500 recorded 42 new 52-week highs and one new low, while the Nasdaq posted 185 new highs and 70 new lows.
Trading volume on U.S. exchanges totaled 18.85 billion shares, slightly above the 20-day full-session average of 18.71 billion shares. With the bulk of the earnings season winding down, analysts were looking at updated estimates for corporate profit growth. LSEG data cited in the reporting showed first-quarter earnings growth is now expected to be 29% year-on-year, up from an estimated 16.1% a month earlier.
Investors are also turning their attention to potential initial public offerings from some of the largest private AI-focused companies, with SpaceX among those named as part of the pipeline of major private listings that could command market attention in the months ahead.
Market takeaway - AI optimism and strong earnings momentum lifted major U.S. indices to fresh highs, led by a surge in semiconductor shares. Geopolitical risks and oil price moves remain factors to monitor as the market digests corporate results and upcoming IPO activity.