Wall Street ends higher as Nvidia sparks a rush for AI stocks

May 25 (Reuters) – Wall Street ended sharply higher on Thursday after a blowout forecast from Nvidia sent shares of the chipmaker soaring and sparking a rally in AI-related companies as investors watched for signs of progress in US debt ceiling talks.

Nvidia Corp. (NVDA.O) rose 24% to a record high after the world’s most valuable chipmaker forecast quarterly revenue 50% higher than estimated and said it was ramping up supply to meet demand for its artificial intelligence (AI) chips comply.

Investors traded nearly $60 billion in Nvidia stock, accounting for one-fifth of all S&P 500 stock trading during the session, according to data from Refintiv.

“Nvidia has officially replaced FANG as the hub of this market,” said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma. “Investors are obsessed with AI and Nvidia is the perfect AI story.”

Heavy AI players Microsoft Corp (MSFT.O) and Alphabet Inc (GOOGL.O) were up 3.9% and 2.1% respectively. Advanced Micro Devices Inc (AMD.O) was up about 11%, Micron Technology Inc (MU.O) added 4.6% and Broadcom Inc (AVGO.O) climbed more than 7%.

The Philadelphia SE Semiconductor Index (.SOX) rose 6.8% to its highest level in more than a year in its largest daily percentage increase since November.

Intel Corp (INTC.O), which investors say is lagging behind in the AI ​​race, was down 5.5% and weighed on the Dow Jones Industrial Average.

Wall Street has been nervous in recent days about the dragging on of negotiations in Washington to raise the US debt ceiling of $31.4 trillion and avoid bankruptcy.

US President Joe Biden and Republican lawmaker Kevin McCarthy came close to a deal on Thursday, with the parties separated by just $70 billion on discretionary spending, Reuters reported, citing a source familiar with the talks.

Due to market uncertainty, two-year yields reached their highest level since March after rating agencies Fitch and DBRS Morningstar placed the United States on credit watch for a possible downgrade.

Meanwhile, data showed the number of Americans filing new claims for unemployment benefits rose only moderately last week, while a report from the Commerce Department confirmed that economic growth slowed in the first quarter.

The S&P 500 climbed 0.88% to end the session at 4,151.28.

The Nasdaq rose 1.71% to 12,698.09 points, while the Dow Jones Industrial Average fell 0.11% to 32,764.65 points.

Volume on US stock markets was relatively high, with 10.8 billion shares traded, compared to an average of 10.5 billion shares in the previous 20 sessions.

The S&P 500 is now up about 8% so far in 2023 and the Nasdaq has recovered more than 30% from last year’s losses.

Ralph Lauren Corp (RL.N) rose 5.3% after the luxury retailer beat earnings expectations.

Electronics retailer Best Buy Co Inc (BBY.N) rose 3.1% after positive quarterly earnings, while discount retailer Dollar Tree Inc (DLTR.O) collapsed after cutting its annual profit forecast.

Falling stocks outperformed rising stocks within the S&P 500 (.AD.SPX) by a ratio of 1.4 to one.

The S&P 500 posted 11 new highs and 31 new lows; the Nasdaq registered 56 new highs and 163 new lows.

Reporting by Shreyashi Sanyal and Shristi Achar A in Bengaluru; Edited by Arun Koyyur, Vinay Dwivedi and David Gregorio

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