AI Investments Drive Tech Giants' Gains as S&P 500 and Nasdaq Hit Record Highs

AI Investments Fuel Tech Giants' Gains

The S&P 500 and Nasdaq reached record highs on Thursday, primarily driven by robust results from Google's parent company Alphabet. The tech giant's performance boosted confidence in the potential of heavy investments in artificial intelligence (AI) technology 1

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. Alphabet's shares rose 1.6%, with other tech heavyweights like Microsoft, Nvidia, and Amazon also seeing gains of over 1% 1

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Alphabet's success in the AI race has had a ripple effect across the tech industry. The company announced plans to increase its budget for AI chips and other investments by $10 billion to $85 billion this year 3

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. This move has sparked enthusiasm for other AI-related stocks, with chip company Broadcom seeing a 1.4% gain 3

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Market Performance and Economic Indicators

While the tech sector flourished, the overall market performance was mixed. The S&P 500 gained 0.08% to close at 6,363.87 points, and the Nasdaq Composite rose 0.19% to 21,057.96. However, the Dow Jones Industrial Average fell 0.69% to 44,698.21 2

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Economic indicators showed resilience in the U.S. job market, with jobless claims falling to 217,000, below estimates 1

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. Business activity also gained momentum in July, although companies raised prices on goods and services, fueling predictions of faster inflation in the coming months 1

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Challenges for Tesla and Other Sectors

Despite the tech sector's strong performance, Tesla faced significant challenges. The electric vehicle maker's stock tumbled almost 9% after CEO Elon Musk warned of "a few rough quarters" ahead due to reduced government support for electric vehicle makers 1

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. Tesla's stock has fallen approximately 25% so far in 2025 2

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Other sectors also experienced difficulties. American Airlines forecast a significant third-quarter loss due to sluggish domestic travel demand, causing its stock to tumble almost 8% 1

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. The airline industry continues to face uncertainty due to ongoing global trade tensions 1

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Trade Negotiations and Federal Reserve Expectations

Investors remained optimistic about trade negotiations, with recent progress in talks with the European Union and a U.S.-Japan trade deal contributing to Wall Street's gains 1

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. However, President Donald Trump's global trade war continues to create uncertainty across various sectors 1

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Market watchers are closely monitoring the Federal Reserve's next moves. With the Fed expected to hold rates steady at next week's meeting, traders see a 60% chance of a September rate cut 1

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. President Trump's planned visit to the Federal Reserve's headquarters has also drawn attention, following months of criticism towards Fed Chair Jerome Powell over interest rates 2

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