Wall Street ended higher Wednesday, extending its tech-led rally and touching two-week highs as worries over artificial intelligence disruption and costs took a back seat to renewed optimism over the nascent technology's potential benefits.
All three major U.S. stock indexes advanced, with the Nasdaq, powered by chips, enjoying the largest percentage gain as markets near the end of a tumultuous month, marked by concerns over massive investment in AI infrastructure and the extent to which it could disrupt myriad industries.
"We're in the middle of a push-pull here between some negative sentiment and some extreme price action in parts of the market," said Zach Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina.
"I think the (AI) disruption concerns are more acute right now than worries over return on investment," Hill added. "Investors are trying to grapple with what could potentially be existential risk, and that's a bigger deal than not receiving as much payout as you would like."
Richmond Fed President Tom Barkin chimed in on the issue, saying it is not clear that the AI rollout will displace workers, adding the technology could enable workers and help the job market become more efficient.
The Philadelphia SE Semiconductor index rose ahead of Nvidia's quarterly earnings report due after the close.
Nvidia, at the forefront of the AI revolution, is expected to post year-on-year earnings growth of 72.2% on revenue of $66.2 billion, according to analyst estimates compiled by LSEG, as the chipmaker benefits from the rush to invest in AI-related infrastructure. Nvidia options imply a move of 5.6% in either direction on Thursday following the company's results.
The S&P Software & Services index, bouncing back from its 23% year-to-date slump, was a clear outperformer.
According to preliminary data, the S&P 500 gained 56.52 points, or 0.82%, to end at 6,946.59 points, while the Nasdaq Composite gained 288.40 points, or 1.28%, to 23,152.08. The Dow Jones Industrial Average rose 310.61 points, or 0.63%, to 49,485.11.
Axon Enterprise jumped after the Taser-maker beat fourth-quarter profit estimates. Both First Solar and Lowe's Companies provided weaker-than-expected annual sales guidance, sending their shares sharply lower.
After Lowe's disappointing report, housing and homebuilders were clear underperformers, despite the 30-year fixed mortgage contract rate dipping to a 3-1/2-year low last week, according to the Mortgage Bankers Association.
On the staples side, alcohol producers Brown-Forman and Molson Coors slid after London-listed Johnnie Walker and Guinness maker Diageo projected a 2% to 3% organic sales decline in 2026 and cut its interim dividend in half. GoDaddy tumbled after the internet services provider forecast annual revenue below Wall Street expectations.
Considering recent volatility in software stocks, results from Salesforce, Intuit and Snowflake will likely be subject to added scrutiny.
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