WASHINGTON: The Dow Jones Industrial Average blew past the historic 50,000 mark on Friday and the S&P 500 ended sharply higher, as Nvidia and other chipmakers soared and Amazon tumbled after the cloud heavyweight forecast a sharp increase in spending on AI infrastructure.
Amazon dropped 5.6% after saying it planned a more than 50% jump in capital expenditures this year, intensifying a race to dominate AI technology and following a similar announcement from Alphabet on Wednesday.
However, chip stocks rallied on expectations they would benefit from increased spending on AI data centers by Amazon and Alphabet.
Nvidia, the world’s most valuable company, jumped 7.8%. Advanced Micro Devices surged 8.3% and Broadcom climbed 7.1%, while the PHLX semiconductor index closed up 5.7%.
Friday’s rallies in the S&P 500 and the Nasdaq followed three straight days of losses marked by worries about AI. Several software companies were hit this week by concerns that AI could create more competition and hurt their margins, while investors have also fretted about elevated valuations following years of steep gains in AI-related stocks.
“This trade has been volatile, and there have been selloffs at times, but I think there’s enough evidence that there’s real demand for AI products, real promise with what they can do, and a necessity of a lot of spending to get there,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky.
“So when there’s this kind of a selloff, I think there’s a floor where there’s going to be a certain set of investors that steps in and starts buying these names.”
Software and data services companies rebounded from recent losses. CrowdStrike and Palantir both rose more than 4%. The S&P 500 Software & Services index added 2.4% and ended seven straight sessions of losses, although its weekly drop of around 8% was its poorest weekly performance since March 2020.
The Dow outperformed the S&P 500 and Nasdaq this week, reflecting a recent diversification by investors away from tech stocks that have led Wall Street in recent years and toward companies that have missed out on those big gains. Reflecting the same trend, the Russell 2000 index of small-cap companies also rallied this week. The S&P 500 climbed 1.97% to end the session at 6,932.30 points.
