Nasdaq Hits Intraday Record as Micron Leads AI Chip Rally

The Nasdaq Composite closed at 27,225.39 on Tuesday, gaining 0.38% after surpassing its previous intraday record high set on June 1. The advance was fueled by a sharp rise in artificial intelligence hardware stocks, with Micron Technology climbing 3.9% and Sandisk jumping 7.2%. This sector-led move lifted the index despite broader market hesitation, as the S&P 500 hovered near flat at 7,767.88, remaining just under 0.5% below its August 13 closing high.

The rally in chipmakers coincided with investor reaction to Meta Platforms' launch of its AI assistant, Muse. The tool’s ability to execute transactions and manage communications has boosted demand for underlying compute infrastructure. However, this same capability has triggered defensive moves in consumer-facing software and services firms, creating a divergent trading session where hardware gains offset service-sector losses.

Muse launch divides consumer and tech sectors

Investors expressed concern that Muse could disintermediate retailers and brokerages by handling purchasing and service bookings directly. This fear drove significant losses in adjacent service businesses, with Charles Schwab falling 5.5% and Expedia dropping 4%. Uber Technologies and Lyft each declined approximately 1%, reflecting broader anxiety that AI agents may bypass traditional customer acquisition channels. Amazon has already blocked the agent from accessing its shopping platform, signaling a defensive posture among major e-commerce players.

Market participants are weighing the competitive threat against the efficiency gains AI agents may provide for end-users. Portfolio managers noted that while the technology strengthens the case for high-performance chips, it simultaneously compresses margins for software companies that rely on manual service interactions. The divergence highlights a structural shift in how digital services are delivered, with hardware providers currently benefiting from the increased processing requirements of such autonomous tools.

Macro factors and earnings valuations remain central

The S&P 500 is trading at just under 19 times expected earnings, the lowest valuation multiple since 2023, according to LSEG data. This affordability is largely attributable to rising earnings forecasts for AI-heavyweights, which are driving the index’s recent performance. Despite the strong earnings outlook, financial stocks faced pressure, with JPMorgan Chase and Wells Fargo both dipping more than 3% on Tuesday. The sector underperformance suggests that investors are rotating capital toward technology growth while remaining cautious on financial credit risks.

Macroeconomic headwinds included oil prices trading near $100 per barrel and the 10-year Treasury yield hovering around 4.97%. These factors were compounded by geopolitical tensions, as President Donald Trump warned of potential conflict in the Middle East during a UN General Assembly speech. Meanwhile, traders are watching a U.S.-China summit scheduled for Thursday, where discussions on trade truces and AI regulation could impact global market sentiment. The CME Group's FedWatch Tool indicates a 53% probability of a 25 basis point interest rate increase in October, reflecting persistent inflation concerns.

Federal Reserve officials signal steady policy stance

Federal Reserve officials provided clarifying commentary on monetary policy during the session. Boston Fed President Susan Collins stated she supported the central bank’s recent interest rate increase, citing ongoing inflation risks. New York Fed President John Williams affirmed that the Fed’s framework for controlling short-term rates has been effective in supporting financial markets. These remarks reinforce the view that the central bank remains focused on price stability, even as the broader economy navigates the integration of new AI technologies and volatile energy prices.