Wall Street ends higher as Nvidia sparks rush for AI stocks

May 25 (Reuters) – Wall Street ended sharply higher on Thursday after a blowout forecast from Nvidia sent the chipmaker’s shares soaring and led to a rally in AI-related companies, as investors looked for signs of progress in talks on the U.S. debt ceiling.

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

Investors swapped nearly $60 billion of Nvidia’s stock, accounting for a fifth of all trading in S&P 500 stocks during the session, according to Refintiv data.

“Nvidia has officially replaced FANG as the centerpiece 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.”

Heavyweight AI players Microsoft Corp ( MSFT.O ) and Alphabet Inc ( GOOGL.O ) rose 3.9% and 2.1%, respectively. Advanced Micro Devices Inc ( AMD.O ) jumped around 11%, Micron Technology Inc ( MU.O ) rose 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 with its biggest daily percentage gain since November.

Intel Corp ( INTC.O ), which investors see as lagging in the AI ​​race, fell 5.5%, weighing on the Dow Jones Industrial Average.

Wall Street has been nervous in recent days about dragging out negotiations in Washington to raise the nation’s $31.4 trillion debt ceiling and avoid a default.

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

Reflecting market uncertainty, two-year yields hit their highest since March after rating agencies Fitch and DBRS Morningstar put the US on credit watch for a possible downgrade.

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

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

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 exchanges was relatively high, with 10.8 billion shares traded, compared with an average of 10.5 billion shares over 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 losses last year.

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

Electronics retailer Best Buy Co Inc ( BBY.N ) rose 3.1% after upbeat quarterly results, while discount chain Dollar Tree Inc ( DLTR.O ) fell after cutting its annual profit outlook.

Declining stocks outnumbered advancing ones 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; Editing by Arun Koyyur, Vinay Dwivedi and David Gregorio

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