The US stock market hits record highs, even as worries about an AI bubble continue

NEW YORK (AP) — Wall Street set records on Thursday, even as a sell-off for Oracle and worries about a potential bubble in artificial-intelligence technology weighed on the market.

The S&P 500 inched up 0.2% and eked past its prior all-time closing high, which was set in October. The Dow Jones Industrial leaped 646 points, or 1.3%, to top its own record set last month. The Nasdaq composite lagged behind and slipped 0.3% because of the weakness for AI stocks.

It’s the latest return to records for the market following what had appeared to be a debilitating set of worries. Some of the most recent included concerns about what the Federal Reserve will do with interest rates and whether all the dollars flowing into AI chips and data centers will produce profits and productivity as prolific as proponents are promising.

Such worries sent Wall Street last month to some of its worst and scariest days since its sell-off during April, but it then got several boosts that helped it regain its footing. Key among them was a continuing parade of companies saying they’re making bigger profits than analysts expected. Stock prices tend to track with corporate profits over the long term.

The Fed also on Wednesday cut its main interest rate for the third time this year and indicated another cut may be ahead in 2026. Wall Street loves lower interest rates because they can boost the economy and send prices for investments higher, even if they potentially make inflation worse.

The Fed’s chair, Jerome Powell, did hint that interest rates may be on hold for a while. But he helped soothe nerves when his comments appeared less harsh than some investors expected in shutting off the possibility of more cuts in 2026.

Easier interest rates can give the biggest benefits to the smallest companies, which are more likely to be losing money and often need to borrow to grow. The Russell 2000 index of the smallest U.S. stocks jumped 1.2% to help lead the market.

Banks and other companies whose profits are closely tied to the strength of the economy also rallied. Gains of 2.5% for Goldman Sachs and 6.1% for Visa were the strongest forces pushing the Dow higher.

The Walt Disney Co. added 2.4% after OpenAI said the entertainment giant is investing $1 billion in it. It’s part of a three-year agreement that will also allow OpenAI to use more than 200 Disney, Marvel, Pixar and Star Wars characters to generate short, user-prompted social videos.

Eli Lilly rose 1.6% after announcing encouraging results from a clinical trial for adult patients who are obese or overweight and have knee osteoarthritis, without diabetes. Planet Labs PBC soared 35% after the provider of satellite images used by governments and businesses reported stronger results for the latest quarter than analysts expected.

But a return to records for the U.S. stock market does not mean all worries are gone.

Oracle dropped 10.8% and had briefly been on track earlier in the day for its worst loss since 2001, when the dot-com bubble was still deflating.

Doubts remain about whether all the spending that Oracle is doing on AI technology will be worth it. Analysts said they were surprised after Oracle laid out on late Wednesday how much it will spend on investments this fiscal year, and questions continue about how the company will pay for it.

Such doubts are weighing on the AI industry broadly, even as many billions of dollars continue to flow in.

Nvidia, the chip company that’s become the poster child of the AI boom and is raking in close to $20 billion each month, fell 1.5% Thursday. It was the heaviest weight on the S&P 500 because of its massive size.

Also on the losing end of Wall Street was Oxford Industries. The company behind Tommy Bahama and Lilly Pulitzer dropped 21.2% after highlighting how its customers have been seeking out deals and are “highly value-driven.”

CEO Tom Chubb said the start of the holiday shopping season has been weaker than the company expected, and it cut its forecast for revenue for the full year.

Lower- and middle-income households are feeling the squeeze of high prices following years of high inflation, along with a slowing job market. That means a roughly 25% chance of a recession, according to Barry Bannister, chief equity strategist at Stifel.

Even all the spending underway for AI chips is “not enough to offset a consumer pull-back,” he said, and the U.S. stock market still broadly looks expensive relative to history.

All told, the S&P 500 rose 14.32 points to 6,901.00. The Dow Jones Industrial Average jumped 646.26 to 48,704.01, and the Nasdaq composite slipped 60.30 to 23,593.86.

In the bond market, Treasury yields held relatively steady after a report said the number of U.S. workers applying for unemployment benefits jumped last week by more than economists expected. That’s a potential indication of rising layoffs.

The yield on the 10-year Treasury inched up to 4.14% from 4.13% late Wednesday.

In stock markets abroad, indexes ticked higher in Europe after falling in much of Asia.

Japan’s Nikkei 225 index sank 0.9%, hurt by a sharp drop for SoftBank Group Corp., which is a major investor in AI.

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AP Writers Teresa Cerojano and Matt Ott contributed.