Tech leads stocks higher as AI jitters switch back to enthusiasm

Investors snapped up beaten-down stocks following a stretch of volatile trading driven by concern about the potential disruption that AI poses to a bevy of sectors

• US stocks rose on strong economic data.
• Meta to use millions of Nvidia chips; Apple speeds up AI devices.
• MSG Sports may separate Knicks and Rangers businesses.

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US equities rose sharply Wednesday as a batch of data confirming the strength of the American economy and a number of developments at the Big Tech giants reignited Wall Street’s excitement for the group.

The S&P 500 Index advanced 0.8% as of 11:22 a.m. in New York, while the technology-heavy Nasdaq 100 Index rallied 1.3%. Investors snapped up beaten-down stocks following a stretch of volatile trading driven by concern about the potential disruption that AI poses to a bevy of sectors.

US industrial production rose in January by the most in nearly a year, while US orders for business equipment increased in December by more than projected, reflecting healthy increases in utility and manufacturing output and solid capital investment. New residential construction in the US also rose to a five-month high in the final month of last year.

Meantime, Meta Platforms Inc. agreed to deploy “millions” of Nvidia Corp. processors over the next few years. Apple Inc. is accelerating development of three new wearable devices as part of a shift toward artificial intelligence-powered hardware. A Bloomberg index of Magnificent Seven stocks gained 1.2%. The iShares Expanded Tech-Software ETF (IGV) rose 1.7%.

Wednesday’s rebound is “a mix of investors sticking with what has been resilient, like semiconductors, and responding to deeply oversold conditions in areas like software,” said Kevin Gordon, head of macro research and strategy at Charles Schwab & Co Inc. “The bounce in software still feels more like a ‘catch the falling knife’ moment to me — I don’t think it does much to dent the rotation trade that has been at play for months.”

Traders have been hunting for potentially cheap stocks after the S&P 500’s biggest weekly drop since November, with a rotation out of richly-valued tech stocks into more defensive corners of the market underway. The US equity benchmark has been struggling to breach the 7,000 milestone since it first made its push toward that level back in October.

“While stocks are largely flat year-to-date, we think the market is treading water right now waiting for its next catalyst,” said Paul Stanley, chief investment officer of Granite Bay Wealth Management, in an emailed note. “Figuring out the winners and losers in AI is likely to be a center theme in 2026. While AI is very promising, investors should not assume that all companies will win on the AI front.”

Wall Street’s worries around the technology shifted abruptly in recent weeks from skepticism that hyperscalers can monetize their heavy AI spending into practical use cases to concern that it is sophisticated enough to threaten business models beyond the traditional tech sphere. The sentiment whiplash has spurred sharp rotations and volatility within the stock market even as moves at the index level have remained small.

At JPMorgan Chase & Co., head of global market intelligence Andrew Tyler called the price action a “new normal for 2026 — small broad index moves with elevated volatility below the surface.”

Apple’s 40-day correlation to the Nasdaq 100 slid last week to the lowest since 2006, according to data compiled by Bloomberg, with the giant’s decision to mostly sit out the AI arms race making it an outlier compared to many of its rivals. The stock was 1.7% higher for the month of February as of Tuesday’s close, compared to a 3.3% decline in the Nasdaq 100 and a 7.5% slump for the Magnificent Seven cohort.

Investors await a number of other market catalysts with Friday’s report on gross domestic product projected to show the economy expanded 2.7% in 2025, and the release of the delayed PCE inflation reading for December. Meantime, the Supreme Court’s ruling on tariffs may come as soon as Friday and an earnings readout from Nvidia is scheduled for next week.

In other corporate news, Madison Square Garden Sports Corp. jumped after its board unanimously approved a plan to explore a possible spinoff that would separate its New York Knicks business from its New York Rangers business, creating two distinct publicly traded companies.

New York Times Co. shares rose after Berkshire Hathaway built a stake in the publisher, while slashing its holding in Amazon by more than 75%. Palantir Technologies Inc. gained after Mizuho Securities upgraded the data-analysis software company to outperform from neutral.