US stocks reach record highs as investors focus on AI spending

In short: US stock markets hit record highs after their best month since 2020, driven mostly by big technology companies and their AI spending plans.

What's going on

US stocks ended April at record highs. The S&P 500, a widely watched list of 500 large US companies, rose 10% in the month. The Nasdaq Composite, which includes many tech companies, rose 15%.

Investors have been buying tech shares again after a dip earlier in the month linked to higher energy prices and worries about the conflict in the Middle East. Analysts have also raised their profit forecasts for large US tech firms, betting that demand for artificial intelligence will keep growing.

A big reason is spending on AI infrastructure, meaning the computers, chips, and data centers needed to run AI systems (like building the roads and power lines before a new neighborhood can grow). The Financial Times reports that Amazon, Meta, Microsoft, and Alphabet are expected to spend about $725 billion on AI infrastructure this year, up 77% from last year.

Some individual stocks moved sharply. Alphabet rose 10% on Thursday and was up about 34% for the month. Intel more than doubled in April, while Meta fell about 9% on Thursday after reporting fewer users and higher planned spending.

What to watch

The rally happened even as oil prices jumped, with Brent crude rising above $125 a barrel, and US gas prices near $4 a gallon. Investors are also paying attention to inflation and interest rates, since higher oil and gas prices can push everyday costs up and make rate cuts less likely. If profits or AI spending plans disappoint, tech stocks could stop carrying the wider market.

Source: Financial Times