AI-driven tech rally pushes US stocks near record highs

A rally in big tech, driven by artificial intelligence (AI) optimism and earnings from major corporations, pushed US stocks close to record highs, as reported by BNN Bloomberg.  

The S&P 500 briefly surpassed 6,100, with notable contributions from Netflix Inc., Nvidia Corp., and Oracle Corp.   

Netflix surged nearly 10 percent after reporting its largest-ever subscriber gain, bolstered by live sports and the return of Squid Game.  

Nvidia led gains in megacap stocks, while Oracle climbed over 6.5 percent following its announcement of a US$100bn AI joint venture with SoftBank Group Corp. and OpenAI. The venture, unveiled alongside President Donald Trump, heightened enthusiasm for the AI sector.   

“The promise of a huge pool of money funding AI investment, whether fully funded or not, is enough to have investors enthusiastic once again about the artificial intelligence and almost anything related to it,” said Steve Sosnick of Interactive Brokers.   

Despite the rally, the broader market struggled. Most companies in the S&P 500 declined, reflecting poor breadth, which remains a significant concern for investors wary of high valuations and frothy AI stocks.    

The S&P 500 gained 0.6 percent, with the Nasdaq 100 up 1.3 percent. The Dow Jones Industrial Average added 0.3 percent, while the Russell 2000 fell 0.6 percent. A Bloomberg gauge of the ‘Magnificent Seven’ megacap stocks rose 1.3 percent.   

Jamie Dimon, CEO of JPMorgan Chase & Co., expressed caution about the overheated US stock market. “Asset prices are kind of inflated,” Dimon told CNBC. “You need fairly good outcomes to justify those prices.”   

The 10-year US Treasury yield increased two basis points to 4.6 percent, while the Bloomberg Dollar Spot Index fluctuated throughout the day.    

AI momentum continued to dominate headlines. Salesforce CEO Marc Benioff revealed that there will be “thousands” of deals for its new Agentforce AI product in the current quarter.  

Samsung Electronics announced plans to launch an ultrathin Galaxy S25 phone in the first half of the year, aiming to outpace Apple in this new category.   

Procter & Gamble reported better-than-expected organic sales growth due to higher volume, while United Airlines projected strong profitability for the first quarter, marking a notable shift during a traditionally slow travel period.   

Other highlights include:   

• Alphabet’s Google secured a UK court ruling preventing Russian media firms from seizing its global assets. 

• Abbott Laboratories forecast lower first-quarter earnings but expects full-year profits to align with Wall Street estimates. 

• Ally Financial’s fourth-quarter earnings surged, driven by improved net interest margins and lower provisions for bad debt. 

“Markets are reacting positively to the initial wave of Trump policies, with investors showing enthusiasm reminiscent of the run-up to the election as they breathe a sigh of relief over the tariff announcements and the early stages of earnings season,” said Mark Hackett of Nationwide.   

Hackett noted that a breakout to new record highs could energize the market further.  

However, BlackRock strategists, including Jean Boivin and Wei Li, emphasized that fundamentals must remain strong for equities to continue their upward trajectory.  

“Even in a higher-rate environment, we still think stocks can keep pushing higher as long as fundamentals stay strong,” they said.    

The S&P 500’s strong annual gains of 24 percent in 2023 and 23 percent in 2024 have raised questions about whether the rally can sustain itself.  

However, Jeff Schulze of ClearBridge Investments suggested history shows that solid, albeit more moderate, returns often follow consecutive years of strong performance.   

Schulze highlighted the concentration of earnings growth in a few stocks in recent years, predicting a broader participation in 2025. This shift could benefit small and mid-cap stocks and value-oriented sectors.   

Solita Marcelli of UBS Global Wealth Management encouraged investors to focus on fundamentals. “Without taking any single-name views, we continue to like technology, utilities, and financials,” she said.   

The stock market’s ‘January effect’ appears to be in full swing, noted John Creekmur of Creekmur Wealth Advisors. He explained that investors are increasingly focused on earnings and potential tax cuts and deregulation under the Trump administration.   

Key market data   

• The MSCI World Index rose 0.5 percent. 
   
• Bitcoin dropped 2.3 percent to $104,337.28, while Ether declined 2.3 percent to $3,255.98. 
   
• West Texas Intermediate crude fell 0.5 percent to $75.43 a barrel. 
   
• Spot gold gained 0.4 percent to $2,756.78 an ounce.   

The week ahead includes significant economic reports and policy meetings:   

• Eurozone consumer confidence (Thursday) 

• US jobless claims (Thursday) 

• Bank of Japan policy meeting (Friday) 

• Eurozone HCOB Manufacturing and Services PMI (Friday) 

• US University of Michigan consumer sentiment, existing home sales, and S&P Global Manufacturing and Services PMI (Friday) 

With markets reacting to both corporate earnings and Trump administration policies, investors remain focused on balancing optimism over AI developments with concerns about high valuations and broader market performance.