The S&P 500 and Nasdaq hit record closing highs on Tuesday, as AI-fueled optimism offset anxiety over Middle East peace talks – concerns that were compounded by recent US strikes on Iran.

Semiconductor stocks, which have surged on AI-driven demand, led gains, with Micron gaining 19 percent, hitting US$1 trillion in market value for the first time after UBS increased its price target on the stock to US$1,625 from US$535.

Upbeat earnings and renewed confidence in AI trade have driven US equities higher despite the ongoing conflict with Iran, with investors now turning their attention to IPOs of some of the largest private AI companies, including SpaceX.

"For those of us that have been working that long, the tech rallies we've been seeing this year are reminiscent of the boom at the end of the 1990s," said Chris Zaccarelli, chief investment officer for Northlight Asset Management. "It's also possible that some of the lessons that were learned after the tech bubble burst over 25 years ago will prevent the same thing from happening again."

The market took comfort from comments by US Secretary of State Marco Rubio, who said that a deal with Tehran to halt the conflict could "take a few days," while Iran's Tasnim news agency reported that Tehran was seeking the release of US$24 billion of Iranian funds frozen overseas.

"Even though we don't have an end of the war yet, there's a very high likelihood the situation will resolve itself in a peaceful fashion sooner rather than later," said Adam Sarhan, chief executive of 50 Park Investments. "But the reality is that earnings are expected to grow even with high inflation. The economy is still growing, and the market is a mirror of the economy to a large extent."

The Dow Jones Industrial Average fell 118 points, or 0.2 percent, to 50,461, the S&P 500 gained 45 points, or 0.6 percent, to 7,519 and the Nasdaq Composite gained 312 points, or 1.2 percent, to 26,656.

The S&P 500, the Nasdaq and the Russell 2000 touched intraday record highs on Tuesday, underscoring the strength of the recent rally.

Brent crude futures climbed about 4 percent on Tuesday after the US military carried out strikes in Iran, adding to uncertainty over whether a deal would be reached soon to end the war and open up shipping flows through the Strait of Hormuz. Qualcomm rose almost 4.5 percent after Bloomberg News reported it reached a deal with TikTok owner ByteDance to supply chips, while Marvell Technology ended 6 percent higher. (Reuters)



Edited by Cecil Wong