Wall Street Rises on Chip Stocks, Overshadowing Iran War Concerns

Wall Street experienced a strong rally, with the Nasdaq index closing significantly higher on Thursday. Chipmaker stocks, particularly Micron Technology, led the advance, helping to overshadow fears that renewed US-Iran hostilities could prolong the Middle East conflict and exacerbate inflationary pressures. Tehran's announcement of strikes on US military targets in Kuwait, Qatar, and Bahrain, in retaliation for earlier US strikes, heightened regional tensions. The PHLX semiconductor index climbed for a second consecutive session.

Micron Technology's stock surged after unveiling a plan to invest over $250 billion in the US by 2035, aiming to capitalize on the demand for memory chips powering artificial intelligence. Other AI-related stocks like Applied Materials and Sandisk also saw gains. Despite recent volatility in AI stocks, investors are focused on the sector's growth potential. Meta Platforms also strengthened following reports of its plans to begin producing AI chips in September.

Analysts anticipate a 24% year-over-year increase in S&P 500 earnings, with technology companies contributing the most. The S&P 500 is trading at approximately 20 times forward earnings, down slightly from a month ago. Meanwhile, US jobless claims fell last week, indicating a resilient labor market. The Federal Reserve held interest rates steady in June, though meeting minutes revealed some officials had advocated for a rate hike, with markets pricing in a potential 25 basis point increase by a future meeting.

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The market remains clearly in an upward phase due to artificial intelligence. For a while, it seemed the rally was broadening, but this depends on the stability of oil prices and interest rates. With the resurgence in the Middle East, this part of the market is being called into question.