Chip rally lifts S&P 500 to record 7,737 on AI earnings

The S&P 500 rose 1.8% to a record 7,737.70, powered by a 6.9% surge in the Philadelphia Semiconductor Index after AI-linked earnings eased concerns about the durability of data-center spending.

"I don't sense one ounce of skepticism among investors, from oil to interest rates to equities," said Jack Ablin, chief investment strategist at Cresset Capital Management. "The earnings reports were certainly supportive, and that's great news, but I'm not sure a handful of earnings reports justifies new records in the S&P."

Technology led the S&P 500 with a 4.4% gain, while materials, industrials and financials each rose at least 1%. Energy fell 0.5%. Palantir Technologies jumped 30%, its biggest daily gain since February 2024, after raising its annual revenue forecast. Arm Holdings climbed 17.1%, Marvell Technology 13.3% and Intel 11.3%. Caterpillar, the biggest single boost to the Dow, added more than 300 points after lifting its annual revenue growth forecast on demand for power-generation gear tied to AI data centers.

The advance coincided with a roughly 5% drop in crude prices after a Qatari official said efforts to secure a diplomatic resolution to the Iran conflict were continuing, while Treasury Secretary Scott Bessent said a deal to reopen the Strait of Hormuz could come within two days. The retreat in oil pulled Treasury yields lower and cut the odds of a Federal Reserve rate hike in September to 56.9% from 67.2%, according to CME FedWatch.

The Nasdaq Composite gained 2.6% to 26,581.99, and the Dow Jones Industrial Average rose 1.7% to 54,090.66, its second straight record close. The S&P 500 secured its first closing record since July 2. The Nasdaq 100 climbed 3.4%. The semiconductor advance was broad, with the memory-chip index gaining 6.8% and the Philadelphia Semiconductor Index rising for a fourth straight session, extending a rebound from a 20.6% slide in July.

Amazon.com fell 2.3% and Diamondback Energy dropped 3.4%, the largest decliners among major names. The drop in crude weighed on energy producers even as it supported the broader market, with Treasury yields retreating from recent highs.

The rally, built on a handful of AI-linked reports, leaves investors betting the global buildout of data centers will sustain demand for chips and power equipment through the rest of the year. Caterpillar's raised forecast, which cited AI data-center construction, and Palantir's upgraded outlook both pointed to spending that extends beyond the largest cloud providers. The question for the remainder of earnings season is whether that demand justifies the record valuations now priced into the market, with investors watching for signs that hyperscaler capital spending is translating into revenue growth.

This article is for informational purposes only and does not constitute investment advice.