AI Chip Gains Push S&P 500 Above 7,800 for First Time

AI chipmakers helped carry the S&P 500 to a record close above 7,800 on Tuesday, as Treasury yields eased and earnings forecasts pointed to strong growth. The index finished at 7,820.85, while the Nasdaq Composite and Philadelphia Semiconductor Index also set records.

Yields and chips support gains

The Nasdaq rose 0.5% to 27,599.79, and the semiconductor index gained 1.4%. Marvell Technology rose about 6% after lifting its long-term outlook, while Advanced Micro Devices gained about 4% to a record and Nvidia added roughly 2%.

The 10-year Treasury yield eased to 5.276% on Tuesday, a day after reaching a 24-year high. Abishai Financial Asia said softer monthly employment data shifted expectations for Federal Reserve policy. Lower yields can support growth-company valuations by reducing the rate used to discount future profits.

Earnings underpin the rally

Analysts forecast S&P 500 third-quarter earnings growth of 29.5% from a year earlier, compared with five-year and ten-year averages of 13.3% and 12.6%. Estimates for the quarter had risen 1.4%, while 72 of 116 companies that issued guidance gave positive projections.

“analysts keep raising their numbers rather than cutting them.”

Daniel Coventry, Abishai Financial Asia’s director of private equity, said the direction of earnings revisions distinguishes the rally from one driven purely by speculation. The report said energy companies were projected to lead earnings growth at 114%, with information technology at 65%.

Concentration remains a risk

The report identified market concentration as a concern: the Magnificent Seven’s share of the S&P 500’s weight had risen to nearly 35%, from roughly 20% almost four years earlier. Coventry warned that this could make portfolios that appear diversified behave like a concentrated bet.

Credit markets also showed signs of strain, with leveraged-loan spreads recently widening by 10 basis points after a run of corporate bankruptcies. The VIX reached a seven-month high. Abishai Financial Asia said the coming reporting season will test whether earnings can support current prices.