Wall Street Returns to Gains as AI-Driven Rally Boosts Indices
New York — U.S. stocks edged higher on Wednesday, resuming a light, daytime ascent after a brief pause that followed the government shutdown. The S&P 500 rose 0.4% and was on track to surpass its Monday all‑time high, while the Dow Jones Industrial Average gained about 79 points (roughly 0.2%) and the Nasdaq composite climbed 0.7% in early trading. The muted session underscores investors’ cautious optimism as they await fresh data and the next signals from the Federal Reserve.
The market’s ascent has been underscored by a mix of macro factors: an ongoing expectation that the Fed will continue to cut interest rates, a resilient U.S. economy, and a surging wave of excitement around artificial intelligence. AI has become a major driver of stock moves, helping lift everything from chipmakers to software platforms and related services. The pace of gains has been swift enough to raise questions about whether valuations are stretching too far, echoing concerns voiced during the dot-com era.
AI Stocks Propelling the Rally
Individual names in the AI space kept the momentum alive. Poet Technologies surged 9.6% after a Tuesday rally that followed news of a $75 million investment aimed at accelerating growth in high-speed optical engines and other AI-relevant products. Dell Technologies, another AI beneficiary, advanced 7.7% amid renewed optimism about growth opportunities tied to artificial intelligence. Advanced Micro Devices added 4.4% on a separate AI-related deal, extending its recent run.
Beyond these movers, the AI sector has shown breadth in gains. Nvidia has led the charge into the year with a near 40% rise, while Oracle jumped around 70% in the same period, and Palantir Technologies has more than doubled, climbing over 140% year to date. Such performance has drawn scrutiny from market observers who warn that lofty prices could invite a correction if growth expectations soften.
Market Cautions as Valuations Stretch
Analysts highlight the tension between exuberant AI stock prices and the fundamental earnings picture. Critics note that the 2000 tech bubble contained many high-flying names with limited profits, and a similar dynamic could surface if investors recalibrate expectations. However, proponents argue that today’s AI-driven rally is supported by tangible revenue growth and scalable profits across tech and cloud-related businesses, distinct in key ways from the late‑90s surge.
The Bank of England also weighed in this week, warning that elevated tech valuations tied to AI could face a “sudden correction” if sentiment shifts. While this is a global concern, U.S. markets continue to price in further rate cuts from the Federal Reserve, which has signaled a careful approach to inflation yet remains confident in a slowing job market. The combination of rate expectations and AI-driven profit potential remains a central theme for traders.
Gold Keeps Setting Records as Inflation Fears Persist
Gold extended its impressive year by pushing further past $4,000 per ounce. Historically seen as a hedge against inflation and a safe haven during economic uncertainty, gold’s ascent reflects worries about mounting debt levels and geopolitical tensions, even as growth signals prompt risk appetite in equities. A sustained run above $4,000 emphasizes the metal’s role as a portfolio ballast in a period of mixed signals from markets and policymakers.
The Fed Minutes in Focus
Investors will be parsing the Federal Reserve’s minutes from its latest meeting later in the day. The central bank cut its key rate for the first time this year and signaled additional reductions could follow. While managing a cooling job market, the Fed remains vigilant about inflation, which still sits above the 2% target. Any new insights into the balance between growth, inflation, and policy adjustments could nudge markets in the direction of risk-on or risk-off trades in the near term.
Global Markets and the Bond Outlook
European equities posted gains following softer margins in Asia, suggesting a global push to risk assets despite a cautious US stance. In the bond market, the yield on the 10-year Treasury eased to 4.11% from 4.14% late Tuesday, a move that can influence the broader sentiment around equities and inflation expectations.
As Wall Street tacks higher again, traders will be watching for fresh data releases and any shifts in inflation expectations that could alter the path of Fed policy. The combination of AI-driven earnings potential and inflationary pressures keeps the market in a delicate balance between risk and reward.
AP Business Writers Matt Ott, Elaine Kurtenbach and Kelvin Chan contributed to this report.
