By Purvi Agarwal and Shashwat Chauhan
(Reuters) – Wall Street’s main indexes rose on Friday with Nasdaq outperforming after an upbeat forecast from Broadcom (NASDAQ:) kept alive the euphoria around artificial intelligence and lifted chip stocks.
Broadcom forecast quarterly revenue above Wall Street estimates and predicted booming demand for its custom AI chips in the next few years, sending its shares up more than 21%. This also helped the company cross $1 trillion in market capitalization for the first time.
“I’m not surprised when companies post earnings like that and up their guidance, especially in the area of AI which is probably the hottest sector right now, that most investors are getting so excited about,” said Peter Andersen, founder of Andersen Capital Management.
“The stock rally is an aspect of this over-enthusiasm for the sector.”
The optimism spread to other chip stocks, with rival Marvell (NASDAQ:) Technology rising 9.5%, while a gauge for semiconductor stocks added 3.7%.
Seven of 11 major S&P sub-sectors were trading lower, though a more than 1% gain in information technology offset losses.
This comes on the heels of a persistent technology stock rally that propelled the Nasdaq above the 20,000 mark for the first time on Wednesday. An in-line inflation reading cementing a 25-basis-point cut from the Federal Reserve next week added to the momentum.
Trader bets on the cut at the central bank’s Dec. 17-18 meeting stand at over 96%, according to CME’s FedWatch Tool. However, they indicate chances of a pause in January.
“A December rate cut by the Fed, in light of recent CPI and PCE headline and core upticks, may not be the most prudent monetary policy action. While it’s key not to hinge long-term strategy on short-term data fluctuations, the trajectory of recent cuts may be risky,” said Ermengarde Jabir, director of economic research, at Moody’s (NYSE:) in a note.
At 9:42 a.m. ET, the rose 86.21 points, or 0.20%, to 44,000.33, the gained 23.14 points, or 0.38%, to 6,074.39 and the gained 129.18 points, or 0.64%, to 20,030.82.
Wall Street had taken a breather in the previous session after recent gains and some hot economic data ahead of the Fed’s meeting, setting the benchmark S&P 500 and the Dow for weekly losses. However, the Nasdaq was on track to end the week higher.
U.S. stocks have climbed to all-time highs multiple this year, as investors flocked to heavyweight tech stocks to capitalize on the hype around AI.
Another tailwind recently has been Donald Trump’s win in the presidential election back November as markets bet his business-friendly policies could enhance corporate profits.
Among other movers, Salesforce (NYSE:) was up 1.4% following KeyBanc’s upgrade of the cloud software seller’s stock to “overweight” from “sector weight”.
RH (NYSE:) jumped 14.5% after the home furnishings retailer reported higher net revenue for the third quarter, compared with a year ago.
Declining issues outnumbered advancers by a 1.42-to-1 ratio on the NYSE and by a 1.27-to-1 ratio on the Nasdaq.
The S&P 500 posted six new 52-week highs and 14 new lows, while the Nasdaq Composite recorded 32 new highs and 74 new lows.
