Nasdaq finishes higher as AI stocks rally

The tech-leaning Nasdaq Composite Index on Wall Street closed 1.71 percent higher on Thursday after a stronger-than-expected earnings forecast from Nvidia fueled a rally among AI-related stocks.

Shares of Nvidia jumped by 24.37 percent to $379.80 after the chipmaker projected second-quarter revenue 50 percent higher than estimates. The stock hit a record high of $391.50 in after hours. The company said it was increasing supply to fulfill demands for its artificial intelligence (AI) chips. The gain boosted the firm's stock market value to over $950 billion.

"Nvidia has officially replaced FANG as the centerpiece of this market," said Longbow Asset Management CEO Jake Dollarhide. "Investors are obsessed with AI, and Nvidia is the perfect AI story."

"Investors are obsessed with AI, and Nvidia is the perfect AI story."

Jake Dollarhide, Longbow Asset Management CEO

The Philadelphia SE Semiconductor index, which tracks the performance of the 30 largest American companies involved in the semiconductor sector, soared by 6.81 percent to its highest level in over a year.

Heavyweight AI leaders Microsoft and Alphabet strengthened by 3.9 percent and 2.1 percent, respectively. Advanced Micro Devices jumped 11.16 percent to $120.35, while Micron Technology finished at $69.61 after adding 4.63 percent.

Broadcom also posted a 7.25 percent increase to $728.80. Earlier this week, Apple announced that it had partnered with Broadcom to build 5G components in the U.S.

On the other hand, shares of chipmaker Intel plunged 5.52 percent to $27.40, weighing on the Dow Jones index. Analysts said the market considered Intel to lag behind its peers in the AI race.

The S&P 500 broke its losing streak by adding 36.04 points or 0.88 percent to conclude the trading session at 4,151.28. The index is now up around eight percent this year, while the Nasdaq Composite has recouped more than 30 percent of its losses from last year.

The Dow Jones was the only benchmark index to close lower on Thursday, falling by 0.11 percent to 32,764.65.

Debt ceiling talks continue

According to analysts, investors in the U.S. equity market have been "nervous" in recent days about the debt ceiling negotiations between the White House and Republication to raise the country's $31.4 trillion debt limit.

Sources said that U.S. President Joe Biden and Republican policymaker Kevin McCarthy were "edging close to a deal" on Thursday, with the two sides being $70 billion apart on discretionary spending.

The deal will raise the federal debt ceiling for two years and cap expenditures on most items, according to an anonymous U.S. official. Biden said both sides disagreed about which categories would experience cuts, adding that middle and working-class Americans should not bear the "whole burden."

The White House will likely scale back its plan to boost funding at the Internal Revenue Service, aimed at expanding the agency's human resources. The administration previously proposed new tax mechanisms to Republicans to increase federal tax revenues.

The Treasury Department has warned that it might not be able to cover all payment obligations as soon as June 1. The government body, however, announced a plan on Thursday to sell $119 billion worth of debt that would come due on the X-date. Analysts said the Treasury announcement suggested that it was not on an "iron-clad deadline."

Analysts said a default would push the U.S. economy into a recession faster than anticipated. The impact of a U.S. recession will be experienced by global markets, with analysts expecting more volatility in risk markets.

Investors are currently also focusing on the Federal Reserve's policy meeting next month. Recent economic data, including weekly jobless claims, pointed out that the U.S. economy was resilient despite the country's high key interest rate.