Key Takeaways
The Nasdaq Composite surged 15% in April, its best monthly performance since April 2020, while the S&P 500 gained nearly 10% to close at a record above 7,200.
The rally was fueled by a projected $725 billion in 2026 capital expenditures on artificial intelligence, with the semiconductor-tracking PHLX Semiconductor Index on pace for its best month since February 2000.
Cross-Asset Snapshot
The Nasdaq Composite capped its best month since the 2020 pandemic rebound, jumping 15 percent in April as blockbuster earnings from technology giants confirmed a massive new spending cycle in artificial intelligence.
"We saw overnight, obviously, all the tech announcements … most notably, just about every single company talked about increasing their capex even more," Marc Lipschultz, co-CEO of private credit firm Blue Owl, said Thursday.
The S&P 500 rallied more than 1 percent to close above 7,200 for the first time, while the Dow Jones Industrial Average climbed 1.7 percent. The Technology Select Sector SPDR Fund (XLK) gained nearly 20 percent for the month, its best since 2002, while the PHLX Semiconductor Index logged its strongest monthly performance since the dot-com peak in February 2000. Trading volume was lighter than average, at 16.37 billion shares, below the 20-day average of 17.81 billion.
The record-setting month solidifies the AI infrastructure build-out as the market's primary driver, forcing investors to weigh soaring capital spending against future revenue growth. With combined 2026 capex for the largest tech firms now pegged at $725 billion, the rally's endurance hinges on this investment translating into profitable growth, especially as a March inflation reading of 3.5 percent complicates the Federal Reserve's path on potential rate cuts.
The wave of earnings from megacap technology companies revealed a stark divergence in investor reaction to aggressive spending plans. Alphabet shares jumped roughly 7 percent after its Google Cloud revenue grew 63 percent to $20 billion with a backlog swelling to $460 billion. In contrast, Meta Platforms plunged 9 percent after raising its full-year capex forecast to a range of $125 billion to $145 billion while its Reality Labs division posted a $4 billion loss. Microsoft shares also slipped 2 percent on a softer revenue outlook, even as its AI run rate hit $37 billion. The market's message was clear: AI spending is only rewarded when it is directly tied to accelerating cloud revenue, as seen in Alphabet and Amazon, whose AWS unit grew at its fastest pace in 15 quarters.
The direct beneficiaries of the AI capital spending boom were semiconductor companies. The iShares Semiconductor ETF (SOXX) soared about 40 percent in April. Intel is on pace for its best month ever, while AMD is tracking its best performance since January 2001. The rally extended to the entire data center supply chain. Caterpillar shares surged 10 percent on strong demand for its power generators used in data centers, while storage provider Seagate Technology rose 11 percent after issuing a strong forecast.
While the AI narrative powered equities higher, the broader macroeconomic picture remained complex. First-quarter GDP growth came in at a solid 2 percent, with business investment contributing more to growth than consumer spending for the first time. However, the Fed's preferred inflation measure, the core PCE price index, remained elevated at 3.2 percent annually. Oil prices provided some relief, with Brent crude easing to around $110 a barrel after hitting a peak of $126 earlier in the month on geopolitical tensions in the Middle East.
This article is for informational purposes only and does not constitute investment advice.
