The Nasdaq Composite surged 1.4% to close at a new all-time high, lifted by renewed enthusiasm for artificial intelligence plays that continue to reshape capital allocation across tech. With lower Treasury yields and broad optimism around enterprise AI deployments, investor risk appetite remains robust even amid caution on valuations.
AI giants drive bulk of gains
NVIDIA rose 3.2%, Alphabet added 2.8%, and Microsoft climbed 2.5%, leading a sector-wide advance after Morgan Stanley raised its global AI spending forecast by 12% for 2025, citing faster-than-expected adoption in manufacturing and logistics. ETF data showed over $3.1 billion flowed into tech-focused funds last week, the highest inflow since March.
“This is now a multi-industry capital story, not just software. Supply chains, robotics, even retail are chasing AI integrations,” noted Karen Liu, a senior strategist at Citi.
Macro tailwinds keep liquidity ample
Lower bond yields continued to underpin growth stocks, with the 10-year Treasury slipping to ~3.85%. Markets also price roughly a 60% probability of a Fed cut in September, sustaining a liquidity backdrop that favors high-duration sectors like technology.
The rotation into tech stands out amid broader earnings worries in cyclicals. The S&P 500 tech index is up 28% year-to-date, outpacing the broader benchmark’s 16% gain.
Can momentum withstand valuation stretch?
Still, pockets of caution persist. Forward price-to-earnings ratios for key AI names hover near 30x, well above historical averages. Some hedge funds have trimmed positions, wary of a scenario where weaker macro data might eventually catch up to overheated multiples.
Yet for now, tech remains the preferred avenue for investors betting on structural growth themes. As long as real rates stay contained and AI adoption accelerates, the Nasdaq looks poised to continue challenging new highs.
