AI-fueled chip rally lifts S&P 500, Dow to records

January 7, 2026 at 07:20 UTC

5 min read

S&P 500 and Dow record highs with AI chip sector surge, technology stocks rally visualization

Key Points

S&P 500 and Dow closed at record highs as 2026 began, led by tech and AI stocks
CES 2026 announcements from Nvidia and AMD sparked sharp gains in chips and data storage
Palantir, Micron, Western Digital and Applied Materials all hit or neared new highs
Investors now turn to key US jobs data and earnings season to test the AI-driven rally

Indexes hit historic highs as tech leads early-2026 rally

US equities extended their strong start to 2026 on Tuesday, with the S&P 500 and Dow Jones Industrial Average closing at fresh record highs. The S&P 500 rose about 0.6% to 6,944.82, while the Dow gained roughly 1% to finish at 49,462.08, closing above 49,000 for the first time. The Nasdaq Composite also advanced around 0.6%–0.7%. Multiple reports noted that all three major benchmarks are either at or near record territory, continuing a bull run that saw the S&P 500 climb 16% in 2025. Trading Economics and other outlets highlighted that expectations for multiple Federal Reserve rate cuts are underpinning the earnings outlook, even as recent data showed the US services sector expanding at its slowest pace in eight months. Markets largely shrugged off geopolitical tensions following US military action and the capture of Venezuela’s leader, with analysts saying investors are instead focused on economic data and corporate news.

CES 2026 puts AI hardware and storage in the spotlight

The annual CES trade show in Las Vegas has become a focal point for the latest leg of the tech rally, with artificial intelligence a central theme. Nvidia CEO Jensen Huang used the event to unveil the company’s next-generation “Vera Rubin” AI platform, saying the chips are in full production and introducing a new “context memory storage” layer aimed at improving chatbot performance in long conversations. He also said Nvidia’s new Rubin chips can be cooled with water at temperatures that do not require a chiller, a comment that weighed on data-center cooling names such as Johnson Controls and Trane Technologies. AMD CEO Lisa Su, meanwhile, showcased new MI455 and MI440X AI accelerators, previewed the MI500 series for 2027, and introduced the Helios rack-scale platform built around Instinct accelerators and EPYC CPUs. AMD also launched the Ryzen 7 9850X3D for gaming and AI PCs. Despite these product updates, AMD shares slipped about 3% in after-hours trading as investors weighed the roadmap against Nvidia’s pace and looked ahead to AMD’s February 3 earnings report.

Chipmakers, equipment suppliers and memory stocks surge

AI optimism and CES headlines drove a broad rally across semiconductor and related hardware names. The Philadelphia Semiconductor Index hit a record, and chip-equipment maker Applied Materials jumped 4.1% to $296.01, a new 52-week high, as investors bet on stronger capital spending for chip factories. Peers Lam Research, KLA and ASML’s US-listed shares also advanced. Analog Devices set a new 52-week high around $293, while Micron Technology, Texas Instruments, NXP and other suppliers gained between roughly 5.6% and 10%. Memory and storage stocks were among the biggest movers after Huang emphasized that the memory storage chip market is underserved. SanDisk surged more than 27%, Western Digital climbed about 17%, and Seagate rose 14%, with all three hitting record highs. Micron shares jumped around 8%–10% to a new 52-week high near $344, helped by earlier analyst upgrades tied to AI-driven DRAM demand and constrained supply. Western Digital also set a new 52-week high above $219, benefiting from strong demand for high-capacity drives from cloud providers and a supply-demand imbalance that has supported pricing.

Palantir extends multi-year run amid AI and defense tailwinds

Palantir Technologies continued its strong momentum, with shares rising about 3% on Tuesday to $179.16 as part of the broader AI and big-tech rally. The move followed a 4.5% gain the prior day after news of a US military operation in Venezuela, which often boosts sentiment toward Palantir given its deep ties to US government and defense agencies. More than half of the company’s revenue comes from government contracts. A separate analysis noted that Palantir has delivered three consecutive years of outsized stock gains, rising 167% in 2023, 341% in 2024 and 135% in 2025. Operationally, Palantir reported Q3 revenue of $1.18 billion, up 63% year over year, with government revenue up 55% to $633 million and commercial revenue up 73% to $548 million. The company posted a 40% profit margin in Q3. However, Wall Street forecasts call for slower growth ahead, with consensus estimates of 54% revenue growth in Q4 and 43% for full-year 2026. At the same time, Palantir’s valuation has expanded sharply, trading at 117 times trailing sales and 176 times forward earnings, according to one report, which argued that several years of high growth are already priced into the stock.

Macro backdrop: AI enthusiasm meets data-dependent Fed

Beyond individual names, the rally is being framed by a mix of AI-driven optimism and expectations for easier monetary policy. Multiple reports described an “everything rally” in which equities, gold, silver and copper all trade near highs. Copper futures recently broke above $13,000 a ton to a record, amid concerns that potential US tariffs on refined copper are drawing inventory into the US and tightening supplies elsewhere. At the index level, gains have been concentrated in technology, semiconductors and data storage, while energy producers such as Chevron and Exxon Mobil retreated alongside a more than 2% drop in oil prices. Investors are now turning to a busy week of US labor-market data, including the ADP employment report, JOLTS job openings and Friday’s December nonfarm payrolls, as they assess whether the economy is cooling enough to justify the scale and timing of Fed rate cuts. Fed officials have sent mixed signals, with some highlighting still-restrictive policy and the potential for more than 100 basis points of cuts this year, while others emphasize a delicate balance between rising unemployment and persistent inflation.

Key Takeaways

AI remains the dominant market driver, with CES 2026 product launches from Nvidia and AMD reinforcing investor focus on chips, memory and data-center infrastructure.
Record highs in the S&P 500 and Dow are closely tied to semiconductor and storage stocks, which are benefiting from expectations of sustained AI-related capital spending.
Palantir exemplifies the tension between rapid AI-fueled growth and stretched valuations, as its strong fundamentals coexist with forecasts for moderating revenue expansion.
The durability of the rally now hinges on upcoming US jobs data and earnings season, which will test whether current expectations for Fed rate cuts and tech earnings are justified.
Cross-asset moves, including surging copper and weaker oil, show investors are repositioning not just within tech but across commodities and cyclicals in response to AI and policy themes.