Wall Street rises on semiconductor rally despite persistent Middle East tensions

Wall Street's major indexes advanced on Thursday, supported by strong gains in semiconductor stocks that helped offset geopolitical concerns following renewed hostilities between the United States and Iran. Meanwhile, Meta Platforms shares declined after a Reuters report revealed plans to produce its own artificial intelligence chip.

The US military announced on Wednesday that it had launched another round of strikes against Iran aimed at ensuring continued shipping through the Strait of Hormuz. Tehran responded with attacks targeting US assets in Kuwait and Bahrain, deepening the confrontation as the fragile ceasefire agreement came under increasing strain.

Semiconductor rally offsets geopolitical concerns and lifts US indexes

The Philadelphia Semiconductor Index (SOX) surged about 5% in early trading, putting it on track for a second consecutive session of gains.

Applied Materials led the sector higher, with its shares jumping 9.4% to become one of the S&P 500's top performers, while the information technology sector gained 1.5%.

Micron Technology also climbed 9% after announcing plans to invest more than $250 billion in the United States by 2035 to meet growing demand for memory chips driven by artificial intelligence.

In contrast, Meta Platforms fell 1% after Reuters, citing an internal memo, reported that the company plans to begin production of its in-house AI chip in September. The decline weighed on the communication services sector, limiting gains in the S&P 500.

Investor sentiment toward AI-related stocks has been volatile in recent sessions amid concerns over whether the sector can sustain the rally that has pushed US equities to record highs in 2026 despite ongoing tensions in the Middle East.

"The S&P 500 and Nasdaq delivered exceptionally strong performance during the first half of the year, largely driven by memory chip companies," said Michael Hewson, Chief Market Analyst at iFOREX.

"There are concerns about whether these companies can continue delivering record revenue and profit growth, and when that coincides with the breakdown of the Middle East ceasefire, it creates a negative mix for markets," he added.

IBM shares fell 2.7%, while Microsoft lost 1.4% after Bloomberg reported that Starbucks had turned to artificial intelligence solutions that reduce its reliance on the two companies.

As of 10:06 a.m. ET, the Dow Jones Industrial Average was up 87.73 points, or 0.17%, at 52,436.12.

The S&P 500 gained 30.23 points, or 0.40%, to 7,512.94, while the Nasdaq Composite rose 160.02 points, or 0.62%, to 26,030.68.

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

On the monetary policy front, the Federal Reserve, led by Kevin Warsh, left interest rates unchanged at its June meeting. However, the minutes released on Wednesday showed that a small number of policymakers saw a case for raising borrowing costs before the committee ultimately agreed to keep rates on hold.

According to LSEG data, markets continue to price in at least one 25-basis-point Federal Reserve rate hike before the end of the year.

Among individual stocks, PepsiCo fell 4.7% despite reporting second-quarter revenue that exceeded analysts' expectations.

Market breadth was positive, with advancing stocks outnumbering decliners by 1.71-to-1 on the New York Stock Exchange and by 1.85-to-1 on the Nasdaq.

The NYSE recorded 28 new 52-week highs and 22 new lows, while neither the S&P 500 nor the Nasdaq Composite posted new intraday highs or lows during the session.