Nasdaq closes higher on semiconductor rally despite escalating US-Iran tensions

The Nasdaq Composite posted strong gains on Thursday as semiconductor stocks led a rally in US equities, outweighing concerns over renewed exchanges of attacks between the United States and Iran and the inflationary risks stemming from the conflict.

Tehran said it had targeted US military sites in Kuwait, Qatar, and Bahrain in retaliation for US strikes against Iran carried out on Wednesday.

Semiconductor stocks overshadow geopolitical concerns and lift Wall Street

The Philadelphia Semiconductor Index (SOX) gained 3.06%, extending its advance for a second consecutive session, while both the Dow Jones Industrial Average and the S&P 500 also closed higher.

Micron Technology rose 4.5% after announcing plans to invest more than $250 billion in the United States through 2035 to meet growing demand for memory chips used in artificial intelligence applications.

Applied Materials gained 3.2%, while Sandisk surged 7.6%.

Artificial intelligence-related stocks have experienced increased volatility in recent weeks as investors question whether the rally that has driven Wall Street to record highs in 2026 can be sustained.

"This remains an AI-driven bull market," said Ross Mayfield, Investment Strategy Analyst at Baird in Louisville, Kentucky. "The rally had begun broadening into other sectors, but that depends on oil prices and interest rates remaining stable. With the latest escalation in the Middle East, that assumption is now being tested."

Meta Platforms also advanced after Reuters reported that the company plans to begin manufacturing its own artificial intelligence chips starting in September.

The S&P 500 closed up 0.81% at 7,543.66, while the Nasdaq Composite gained 1.30% to 26,206.89. The Dow Jones Industrial Average rose 0.27% to 52,487.41.

Seven of the 11 major S&P 500 sectors finished higher, led by information technology, which gained 1.65%, followed by consumer discretionary, up 1.46%.

Following Thursday's gains, the S&P 500 is now up about 10% since the start of 2026 and stands less than 1% below its record closing high reached on June 2.

Investors remain cautious ahead of earnings season and Fed meetings

With the second-quarter earnings season approaching, analysts surveyed by LSEG I/B/E/S expect S&P 500 companies to report annual earnings growth of 24%, with technology companies accounting for the largest share of that increase.

The index is currently trading at a forward price-to-earnings ratio of around 20, compared with roughly 21 a month ago.

On the economic front, the number of Americans filing new unemployment claims declined last week, pointing to continued resilience in the labor market despite slower job growth in June.

The Federal Reserve kept interest rates unchanged at its June meeting under Chair Kevin Warsh. However, minutes released on Wednesday showed that a small number of policymakers saw a case for raising borrowing costs before the committee ultimately agreed to leave rates unchanged.

According to CME Group's FedWatch tool, markets are currently pricing in a 25-basis-point interest rate hike by the December meeting.

Among individual stocks, PepsiCo fell 3.3% despite reporting quarterly revenue that exceeded analysts' expectations.

Costco Wholesale dropped 4.2% to its lowest level in six months after reporting slower growth in comparable sales during June.

Advancing stocks outnumbered decliners within the S&P 500 by a ratio of 1.5-to-1. Total trading volume on US exchanges reached approximately 14.7 billion shares, compared with the 20-session average of 22.9 billion.