S&P 500, Nasdaq hit all-time highs amid AI optimism and Middle East peace hopes

The S&P 500 and Nasdaq indices recorded new record highs on Wednesday, continuing the strong rally driven by ongoing enthusiasm surrounding artificial intelligence, alongside expectations of a peace agreement between the United States and Iran.

The latest wave of enthusiasm in the AI sector came after Advanced Micro Devices forecast second-quarter revenue above expectations, supported by strong demand for data center chips.

Kevin Gordon, head of macroeconomic and strategy research at Schwab Center for Financial Research, said that the market “cannot escape the state of euphoria surrounding investment in artificial intelligence.”

He added that a prolonged war and higher gasoline prices could pressure spending, but in the absence of clear signs of job losses, the economy remains far from entering a full recession.

The ADP National Employment Report showed that US private sector employment increased by 109,000 jobs in April, marking the largest increase since January 2025.

At the same time, oil prices fell to their lowest levels in two weeks, with Brent crude contracts declining by 6.6%, leading the S&P 500 energy sector index to fall by about 3%. A Pakistani source reported that Washington and Tehran are nearing an agreement on a one-page memorandum of understanding to end the war.

According to a report published by Axios, the memorandum would stipulate ending the conflict and beginning a 30-day negotiation period to reach a detailed agreement that includes reopening the Strait of Hormuz, limiting Iran’s nuclear program, and lifting US sanctions.

The gains in equities reflect increased investor risk appetite, especially as corporate earnings remain strong and hopes for reaching a peace agreement persist. However, some analysts warned against excessive optimism in the absence of clearer signals of actual progress.

Kyle Rodda, senior financial market analyst at Capital.com, said that Wall Street continues to bet that the war in the Middle East will not escalate again and will not disrupt the market rally driven by earnings.

He added that there is a significant risk that if this bet proves wrong, high-risk assets could face a sharp reversal, but noted that signals coming from the United States appear reassuring that it is not seeking renewed escalation.

During trading, the Dow Jones Industrial Average rose by about 450.72 points, or 0.91%, to 49,744.78 points, while the S&P 500 gained 57.64 points, or 0.79%, to 7,316.86 points, and the Nasdaq Composite climbed 256.35 points, or 1.01%, to 25,582.48 points.

Eight of the 11 major sectors within the S&P 500 posted gains, while the Philadelphia Semiconductor Index rose by 2.9% to record a new all-time high.

Advanced Micro Devices shares jumped by 16.7%, while rival Intel gained 2.7%. Super Micro Computer shares also rose by 16.6% after strong fourth-quarter revenue and earnings forecasts.

Alphabet shares rose by 1.5%, while Nvidia shares jumped by 4%.

Advancing stocks outnumbered decliners by a ratio of 2.27 to 1 on the New York Stock Exchange, and by 1.54 to 1 on the Nasdaq. The S&P 500 recorded about 36 new 52-week highs against 13 new lows, while the Nasdaq recorded 115 new highs and 50 new lows.