S&P 500 ends higher, lifted by Nvidia and other AI stocks

The S&P 500 ended higher on ⁠Wednesday, ⁠lifted by gains in Nvidia, Amazon ⁠and other technology-related heavyweights following recent jitters about artificial intelligence.

Nvidia climbed after the ​world’s most valuable company said it had signed a multi-year deal to sell to Meta Platforms millions of its ‌current and future AI chips. 

Sandisk, Western ‌Digital and Seagate Technology Holdings climbed for much of the session, adding to strong gains in recent months ⁠fueled by massive ⁠AI-related demand for their storage technology.

AI-related stocks lost ground earlier this month as ​investors worried about high valuations and how long it might take for AI investments to boost revenue growth.

As U.S. markets reopen on Tuesday, stock futures were slightly in ​the red ahead of the bell, with traders perhaps still wary of the wild AI-related swings in various parts of the tech sector last week.

Despite that, the broader mood remains upbeat. Bank of America’s monthly global fund manager survey for February continues to suggest investor sentiment is “uber-bullish” on the economy and earnings for the year - albeit with red flags ​still flying about possible overspending on AI infrastructure.

Elsewhere, global stocks were steady. In Asia, the mood was muted in holiday-thinned trading, with Japan’s Nikkei ⁠slipping ⁠after yesterday’s lower-than-expected GDP print. Those ⁠figures showed the Japanese economy ​grew at an annualised 0.2% in the fourth quarter, well below a forecast 1.6% gain.

That weighed on the yen on Monday, with the ​currency easing 0.4% against the dollar after ⁠last week’s almost 3% rise, before reversing its losses on Tuesday.

Amazon and Microsoft rose on Wednesday.

“At a certain point, weakness in tech was bound to bring in the marginal buyer. These are still ​high-growth names. They were expensive and they’ve gotten cheaper,” said Ross Mayfield, an investment strategy analyst at ⁠Baird ⁠in Louisville, Kentucky. “There are still ⁠a lot of ​people who want to be exposed to tech for the next several years.”

Software makers also showed signs ​of recovery following recent worries that ⁠improved AI tools could lead to more competition and squeeze their profit margins. 

The S&P 500 software and services sector increased after tumbling earlier this month. It was helped by advancing Cadence Design Systems shares, after the chip-design software provider beat fourth-quarter revenue estimates.

Palo Alto Networks dropped after trimming its annual profit forecast. 

According to preliminary data, the ⁠S&P 500 gained 37.05 points, or 0.56%, to end at 6,880.27 points, while the Nasdaq ⁠Composite gained 170.88 points, or 0.76%, to 22,749.27. The Dow Jones Industrial Average rose 123.44 points, or 0.25%, to 49,656.63.

Federal Reserve officials were in nearly unanimous agreement to keep interest rates on hold at their meeting last month, but remained split over what might happen next, according to minutes of their January 27-28 meeting released on Wednesday.

Traders are pricing in a roughly 50% chance of a rate cut of at least 25 basis points by the Fed’s June meeting, according to CME’s FedWatch Tool.

Data released on Wednesday showed solid business spending and U.S. economic growth in the ⁠fourth quarter.

Analog Devices rose after the chipmaker forecast second-quarter results above Wall Street estimates.

Global Payments jumped after the payment technology firm projected annual adjusted profit above expectations.

Moderna climbed after the U.S. Food and Drug Administration agreed to review its influenza vaccine, reversing an earlier decision rejecting the application.