U.S. stock futures were little changed Wednesday night after the S&P 500 and Nasdaq Composite closed at fresh record highs, as investors balanced optimism over a possible end to the Iran war against renewed warnings from President Donald Trump that military strikes could resume if negotiations collapse.

Futures tied to the S&P 500 and Nasdaq 100 slipped about 0.1%, while Dow Jones Industrial Average futures fell modestly by roughly 35 points, suggesting markets may pause after a powerful rally driven by easing geopolitical fears, cooling oil prices, and another wave of strong corporate earnings.

The subdued overnight trading came after a sharp surge during Wednesday’s regular session, when the S&P 500 climbed 1.46%, and the Nasdaq jumped 2.02%, with both indexes reaching new intraday and closing highs. The Dow Jones Industrial Average advanced more than 600 points.

The rally accelerated after Axios reported that Washington and Tehran were nearing a one-page, 14-point memorandum of understanding aimed at ending the two-month-long conflict and laying the groundwork for broader nuclear negotiations.

According to the report, White House officials believe a framework agreement could eventually stabilize the region after weeks of attacks, shipping disruptions, and fears of a wider regional war that rattled financial markets and sent oil prices soaring.

Investor sentiment improved sharply because markets increasingly view de-escalation in the Middle East as critical to avoiding a second wave of global inflation.

Since the war began, traders have worried that prolonged disruptions to shipping through the Strait of Hormuz could trigger sustained spikes in energy costs, transportation expenses, and consumer prices worldwide. Those concerns eased this week as oil prices retreated sharply on expectations that Gulf energy flows may eventually normalize.

Still, markets lost some momentum late Wednesday after Trump warned that negotiations were not yet finalized and threatened intensified military action if Iran rejected the proposal.

“If they don’t agree, the bombing starts,” Trump wrote on Truth Social, adding that future strikes could be carried out at a “much higher level and intensity.”

The comments highlighted the fragile nature of the current market optimism. While investors have welcomed signs of diplomacy, analysts caution that geopolitical risks remain elevated because any breakdown in negotiations could rapidly reignite volatility across oil, equities, and bond markets.

Iran’s foreign ministry confirmed it was evaluating the U.S. proposal, though officials in Tehran have continued demanding guarantees tied to sanctions relief, military withdrawals, and broader regional security arrangements.

Beyond geopolitics, another major force supporting equities has been the resilience of corporate earnings, particularly in technology and AI-linked sectors. Investors increasingly believe the artificial intelligence investment cycle remains strong enough to offset concerns about slowing global growth, high interest rates, and geopolitical instability.

Market strategists note that the latest earnings season has reinforced confidence that major companies are still benefiting from aggressive spending on cloud infrastructure, automation, AI software, and data centers. That has helped sustain what many on Wall Street now describe as an AI-driven secular bull market.

Samantha McLemore, founder of Patient Capital Management, said investors may have underestimated the durability of the rally because persistent fears about bubbles and overvaluation have actually restrained excessive speculative behavior.

Her comments come amid a broader shift in market psychology, where strong earnings growth rather than purely speculative enthusiasm is increasingly being viewed as the main driver behind record equity prices.

Individual stocks also moved sharply after hours.

DoorDash surged 12% after issuing stronger-than-expected second-quarter order guidance, signaling continued resilience in consumer spending and digital delivery demand. Cybersecurity company Fortinet climbed 16% after raising its full-year billings outlook, adding to growing investor interest in cybersecurity firms amid escalating concerns about AI-powered hacking threats and geopolitical cyber risks.

The strong reaction to Fortinet’s results also underscores how cybersecurity has become one of the fastest-growing segments of the broader AI investment boom, as corporations and governments race to defend systems against increasingly sophisticated attacks.

Attention now turns to another heavy slate of earnings reports and economic data due Thursday. Companies scheduled to report before the opening bell include McDonald’s, Shake Shack, Shell, Planet Fitness, Datadog, and Peloton Interactive.

Investors will also closely monitor fresh U.S. economic indicators, including jobless claims, productivity data, construction spending, and consumer credit figures, for clues about the strength of the economy and the Federal Reserve’s next policy moves.

Currently, Wall Street appears caught between two powerful narratives: confidence that AI-driven earnings growth can continue propelling equities higher, and lingering anxiety that geopolitical tensions in the Middle East could still destabilize global markets if diplomacy fails.

Wall Street roared to fresh record highs on Wednesday as investors brushed aside geopolitical anxiety and doubled down on the artificial intelligence trade, betting that the global race to build AI infrastructure will continue to fuel corporate profits, economic expansion, and equity market gains.

The rally marked another decisive shift in investor sentiment after weeks dominated by fears surrounding the Iran conflict, surging oil prices, and the prospect of prolonged high interest rates.

Instead of retreating from risk, traders poured back into technology and semiconductor stocks following strong earnings and bullish forecasts from Advanced Micro Devices, whose results reinforced the view that AI spending remains one of the most powerful forces in global markets.

The Nasdaq Composite surged 2.03% to close at a record 25,838.94, while the S&P 500 climbed 1.46% to a fresh all-time high of 7,365.09. The Dow Jones Industrial Average rose 1.24% to 49,910.59.

The gains extended a remarkable recovery in U.S. equities this year. The Nasdaq is now up 11% in 2026, while the S&P 500 has gained nearly 8%, driven largely by explosive momentum in AI-related stocks.

At the center of Wednesday’s rally was AMD, whose shares soared almost 19% to an all-time high after the chipmaker forecast quarterly revenue above Wall Street expectations on surging demand for data center processors used in artificial intelligence systems.

The results added fresh fuel to a semiconductor rally that has become one of the defining themes of global markets. The broader Philadelphia Semiconductor Index jumped 4.5%, pushing its gains for the year to an extraordinary 62%. Intel rose 4.5%, while Nvidia advanced 5.7%, extending its dominance as the leading supplier of chips powering the AI boom.

The semiconductor sector’s meteoric rise is increasingly reshaping the structure of the U.S. market and wider economy. Investors are no longer viewing AI solely as a software story. The boom is now lifting power companies, networking firms, optical equipment makers, cloud infrastructure providers, and industrial manufacturers tied to data center expansion.

Corning surged after announcing a partnership with Nvidia to expand U.S. production of optical connectivity products used in AI facilities, underscoring how the race to scale computing infrastructure is creating ripple effects across multiple industries.

Meanwhile, Super Micro Computer rallied 24.5% after issuing stronger-than-expected revenue and profit guidance, while AI infrastructure developer Hut 8 soared 35% after signing a 15-year lease valued at $9.8 billion for its Beacon Point data center campus in Texas.

The scale of those moves reflects how Wall Street’s AI enthusiasm has broadened beyond mega-cap technology giants into companies building the physical backbone of the digital economy.

Investors were also encouraged by signs that tensions in the Middle East may be easing after weeks of fears that the Iran conflict could trigger a deeper global economic shock.

Global markets rallied, and oil prices fell sharply after Iran said it was reviewing a new U.S. proposal while sources indicated Washington and Tehran were moving closer to a one-page framework agreement aimed at ending the war, even as sensitive issues surrounding Iran’s nuclear program remain unresolved. Brent crude plunged roughly 8% to around $101 a barrel, relieving pressure on investors worried that prolonged energy price spikes would reignite inflation and delay central bank rate cuts.

The sharp drop in oil prices helped stabilize broader market sentiment because investors had increasingly feared that disruptions around the Strait of Hormuz could produce another global inflationary surge similar to the energy shocks that rattled economies in previous crises.

A Sign of Worst-case-scenario

While geopolitical risks remain elevated, traders interpreted the latest developments as a sign that the worst-case scenario of prolonged regional escalation may be avoided.

“The economy is chugging along just fine. There’s no real danger signs of something that’s even close to approaching a downturn. And so with that as a backdrop, you have to own stocks,” said Thomas Martin, senior portfolio manager at Globalt Investments.

The broader economic backdrop has also remained surprisingly resilient, even as borrowing costs stay elevated. Fresh labor market data showed U.S. private payrolls posted their largest increase in 15 months in April, suggesting employers are still hiring aggressively despite concerns surrounding global instability and tighter financial conditions.

Attention is now turning to Friday’s highly anticipated nonfarm payrolls report, which economists expect will show the economy added 62,000 jobs in April after a stronger-than-expected gain of 178,000 in March.

A resilient labor market has become both a strength and a complication for investors. Strong employment supports consumer spending and corporate earnings, but it also raises the possibility that inflation could remain stubbornly high, forcing the Federal Reserve to keep interest rates elevated for longer.

That concern resurfaced Wednesday after St. Louis Federal Reserve President Alberto Musalem warned that risks to monetary policy are increasingly tilting toward higher inflation.

His comments supported a growing debate on Wall Street over whether the AI-driven economic expansion could itself become inflationary. Massive spending on chips, data centers, and electricity is already pushing up demand across sectors tied to the AI supply chain.

Investors, however, appear willing to tolerate that risk as long as earnings growth remains strong.

Corporate America’s latest earnings season has largely exceeded expectations, particularly among technology and AI-linked firms. According to LSEG I/B/E/S data, more than 80% of S&P 500 companies reporting through May 1 beat analysts’ profit estimates, putting the index on pace for its strongest earnings growth in more than four years.

Outside technology, several major companies also delivered strong performances. Disney rose 7.5% after reporting stronger-than-expected quarterly results and outlining growth initiatives under CEO Josh D’Amaro. Uber climbed 8.5% after forecasting robust second-quarter bookings, suggesting consumer demand remains intact even amid elevated interest rates.

Market participation also broadened significantly, another encouraging signal for bullish investors. Nine of the S&P 500’s 11 sectors closed higher, led by industrials and information technology. Trading activity was heavy, with nearly 18.8 billion shares changing hands, above the 20-session average of 17.6 billion shares.

Still, concerns about market valuations are quietly growing.

The relentless rise in AI-related stocks has pushed valuations higher across the technology sector, prompting some strategists to warn that investor optimism may be running ahead of fundamentals. The S&P 500’s forward price-to-earnings ratio has continued climbing as markets rally, raising questions about how long earnings growth can sustain the pace needed to justify current stock prices.

Yet for now, investors appear convinced that the AI boom represents a structural transformation rather than a temporary market cycle. That belief has allowed markets to look past war fears, inflation concerns, and elevated borrowing costs, at least temporarily.

A little-watched inflation signal absent from the U.S. economy for roughly six decades is flashing again, adding to mounting concern on Wall Street that the artificial intelligence boom and surging energy costs could reignite a broader inflation cycle just as policymakers struggle to regain price stability.

Strategists at Stifel say technology-related prices are now rising faster than wage growth, a dynamic rarely seen in modern economic history and one they believe points to a new inflationary phase driven by investment booms, AI infrastructure spending, and mounting energy constraints.

The firm described the shift as evidence that the U.S. economy is rotating into what it called a “Run Hot” regime.

“Overall, the US economy appears to be rotating into a ‘Run Hot’ regime,” Stifel strategists wrote in a client note. “While this environment is typically bullish for nominal and real GDP, the current mix favors investment over consumption, pressuring the consumer alongside an ongoing energy shock.”

The warning comes at a delicate moment for financial markets and the Federal Reserve, which has spent years trying to contain inflation after the post-pandemic price surge.

What makes the latest signal unusual is the source of inflationary pressure. Historically, periods when prices rise faster than wages have often been associated with labor shortages, commodity shocks, or excessive consumer demand. This time, however, strategists say the pressure is increasingly coming from the AI investment boom itself.

According to data from the Bureau of Economic Analysis, personal consumption expenditures tied to information processing equipment, the Fed’s preferred inflation gauge for technology-related goods, rose at an annualized pace of 8% during the first quarter of 2026. That significantly outpaced the 3.5% annual growth in average hourly wages reported in March by the Bureau of Labor Statistics.

Analysts say the divergence reflects how rapidly demand for AI infrastructure is colliding with physical supply constraints across the semiconductor, power, and data-center industries. The AI boom has triggered an intense global scramble for advanced chips, high-bandwidth memory, networking equipment, and graphics processing units, particularly those produced by companies such as Nvidia. The result has been rising prices across portions of the technology supply chain that had traditionally been deflationary for decades.

For much of the modern digital era, technological progress helped suppress inflation by making computing power cheaper and more efficient over time. Economists often viewed technology as inherently disinflationary.

That assumption is now being challenged.

Instead of lowering costs, the current AI buildout is generating massive capital expenditures, tightening supply chains, and increasing electricity demand at a scale that some analysts say resembles an industrial boom more than a typical software cycle.

Strategists at Goldman Sachs echoed those concerns this week, warning clients that AI-related spending could itself become an inflationary force.

The bank pointed to surging hardware prices, premium pricing for AI-enabled software products, and escalating electricity consumption from hyperscale data centers.

“We believe the economy is shifting into an Inflationary Boom,” Goldman analysts wrote.

The inflation implications extend far beyond Silicon Valley. AI infrastructure construction is increasingly feeding demand across utilities, industrial equipment, construction materials, and energy markets. Data centers require enormous and stable electricity supplies, forcing utilities and governments to accelerate spending on grid infrastructure and power generation.

That dynamic is unfolding at the same time geopolitical tensions in the Middle East continue to push oil prices sharply higher. Crude prices have surged in recent weeks amid fears surrounding the Iran conflict and disruptions near the Strait of Hormuz, a critical artery for global energy shipments. Investors worry that higher fuel and transportation costs could further embed inflation across the broader economy.

The latest inflation data already suggests price pressures are intensifying again. U.S. inflation accelerated to a 3.3% annual pace in March, the highest reading in two years. The concern for policymakers is that the economy may now be entering a phase where investment-driven inflation becomes more persistent and structurally embedded.

Unlike consumer-driven inflation booms, which can sometimes cool quickly as households cut spending, investment booms tied to infrastructure and technologies often persist for years because governments and corporations view them as essential long-term priorities.

The AI race has increasingly taken on that character. Major technology companies, including Microsoft, Amazon, Alphabet, and Meta Platforms, are collectively spending hundreds of billions of dollars to expand AI infrastructure, while countries across Europe, the Middle East, and Asia are racing to secure semiconductor capacity and data-center investments.

Stifel said there appears to be “little near-term relief” from the resulting price pressures because enthusiasm for AI investment remains exceptionally strong even as supply bottlenecks worsen. The firm also warned that the inflationary environment may be contributing to increasingly speculative behavior in financial markets.

Strategists pointed specifically to the “near parabolic move within the AI hardware trade,” where semiconductor and infrastructure stocks have soared on expectations that AI demand will continue expanding rapidly for years. That combination of rising asset prices, accelerating capital spending, and resurging inflation is beginning to resemble earlier late-cycle boom periods that ultimately forced central banks into more aggressive policy responses.

For the Federal Reserve, the resurgence of inflation tied simultaneously to energy shocks and AI-driven investment spending could complicate future interest-rate decisions. Higher rates may cool parts of the economy, but they are less effective at resolving physical supply shortages in semiconductors, electricity generation, and industrial infrastructure.

That raises the possibility the U.S. could face a more difficult policy environment in which inflation remains elevated even as consumers begin showing signs of strain under higher borrowing costs and living expenses. The deeper concern emerging on Wall Street is that artificial intelligence, initially viewed primarily as a productivity revolution that would lower costs over time, may first unleash a prolonged period of capital-intensive inflation before any efficiency gains fully materialize.