Wall Street ended higher on Friday as renewed demand for AI-related technology stocks helped the S&P 500 and Nasdaq recover from a volatile week, although the rally remained constrained by rising oil prices, elevated Treasury yields and growing expectations that the Federal Reserve could resume raising interest rates.
Microsoft was among the biggest drivers of the technology-led advance, gaining 3.7% after unveiling new capabilities for its Copilot artificial intelligence platform, including a coding tool and an always-on AI agent. The gain lifted Microsoft’s 2026 advance to 7%.
Qualcomm rose 4%, and Dell gained 5%, adding to a broader recovery in technology stocks tied to the continued expansion of AI infrastructure.
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Akamai Technologies also advanced 3.2% after announcing an $11.6 billion, seven-year cloud infrastructure agreement with Anthropic. The deal includes a warrant that could give Anthropic a stake of as much as 5% in Akamai, creating another example of the interconnected financial relationships between AI developers and the companies supplying their computing infrastructure.
“That’s a positive from the standpoint that people are still investing, deals are still being done,” said Thomas Martin, senior portfolio manager at Globalt Investments in Atlanta. “It’s another circular deal, so OK … but Akamai stock is up.”
The gains pushed the S&P 500 up 0.51% to 7,743.41. The Nasdaq rose 0.48% to 27,068.72, while the Dow Jones Industrial Average gained 0.93% to 51,828.62.
For the week, the S&P 500 advanced 1.2%, and the Nasdaq gained 2%, following a record close for the technology-heavy index on Tuesday.
Yet the market’s weekly performance masks a more complicated backdrop. Investors are increasingly having to assess two opposing forces: the earnings and investment momentum generated by AI, and the tightening financial conditions created by higher oil prices and government bond yields.
AI Spending Continues to Support Markets
Seven of the S&P 500’s 11 sector indexes finished higher on Friday, led by information technology, which gained 0.91%. Industrials followed with a 0.6% increase.
The latest economic data also bolstered the importance of AI investment to the US economy.
Business spending on AI-related infrastructure helped drive demand for key manufactured capital goods in August, with orders exceeding expectations. That provides another indication that the AI boom is translating into real investment across the broader economy rather than remaining confined to technology companies.
The market’s enthusiasm, however, is increasingly dependent on whether that spending eventually produces sufficient earnings.
The S&P 500 traded at just under 19 times expected earnings during the week, its lowest valuation since 2023, according to LSEG data. AI-heavy companies have accounted for much of the recent improvement in earnings expectations, creating a potentially important distinction for investors. The market is not simply pricing AI as a technological theme. It is increasingly relying on the technology’s ability to generate earnings growth large enough to justify the capital being deployed across chips, cloud computing, data centers, and software.
Microsoft’s latest Copilot expansion and Anthropic’s massive Akamai commitment provide fresh evidence of continuing AI demand. But they also highlight the scale of investment required to sustain the sector.
Treasury Yields Remain The Bigger Macro Threat
The strongest constraint on the equity rally came from the bond market. The benchmark 10-year Treasury yield reached a fresh 19-year high and was last up 3.4 basis points at 5.196%. A yield above 5% represents a significant change in the financial environment for equities because it raises the return investors can obtain from relatively low-risk government debt.
It also increases borrowing costs throughout the economy.
The rise in Treasury yields has been driven by a combination of persistent inflation concerns, strong economic data, and expectations that the Federal Reserve may need to raise interest rates again.
Markets were pricing a 66% probability of at least a 25-basis-point Fed rate increase in October, according to CME Group’s FedWatch Tool, up from roughly 50% earlier in the week. That repricing is occurring even as investors continue to absorb the effects of already elevated borrowing costs.
For technology companies, the issue has become relevant because higher interest rates increase the discount rate applied to future earnings. Companies whose valuations depend heavily on expectations of strong earnings growth several years into the future can therefore face greater pressure when bond yields rise.
The fact that technology stocks still advanced in the face of a 5.2% 10-year yield suggests that investors remain willing to pay for companies they believe can produce sufficient AI-driven growth. But it also means the earnings burden on the sector is becoming higher.
Oil Adds Another Inflation Risk
Oil remains another source of uncertainty. Brent crude eased on Friday but stayed above $100 a barrel as investors monitored diplomatic efforts to end the US-Iran war and reopen the Strait of Hormuz.
Reports that US and Iranian negotiators were exploring a phased path out of the conflict provided some relief to markets. Such an arrangement would involve Tehran reopening the strategic waterway and Washington lifting its economic blockade of Iran.
The prospect of easing tensions helped offset some of the pressure created by elevated energy prices.
The market remains highly sensitive to developments in the Middle East because a prolonged disruption around the Strait of Hormuz could feed directly into global energy prices and inflation expectations.
Higher oil prices create a difficult policy environment for the Federal Reserve. Energy costs can raise headline inflation while simultaneously reducing consumers’ purchasing power and increasing companies’ operating expenses. That combination could make it harder for the central bank to support economic activity through lower interest rates.
Investors Remain Selective Within AI
The week’s trading also showed that enthusiasm for AI is no longer uniform across the technology sector.
Microsoft rallied strongly, while Qualcomm, Dell and Akamai also benefited from expectations surrounding AI-related demand.
Meta Platforms, however, fell 3.3% on Friday even though its shares had climbed about 13% during the week following the strong reception to its Muse AI agent.
Muse has generated expectations that AI agents could benefit companies providing computing infrastructure, but the technology could also disrupt businesses that depend on conventional digital intermediaries, including banks, online shopping platforms and other consumer-facing services.
Despite the headline gains, market breadth remained mixed.
Advancing stocks outnumbered declining stocks within the S&P 500 by 1.9 to 1, but the Nasdaq recorded 175 new lows against 54 new highs. The S&P 500 posted three new highs and 31 new lows.
Trading volume was also relatively light, with 14.9 billion shares changing hands compared with a 20-session average of 16.8 billion.
That suggests Friday’s advance was not necessarily evidence of a broad-based removal of risk from the market. Investors continued to concentrate on companies with strong AI exposure and the earnings growth associated with it, while other areas remained vulnerable to higher rates and energy costs.
The summit between Trump and Chinese President Xi Jinping also provided some support to sentiment. Trump described his meeting with Xi as “very productive” following their three-day summit, although the gathering produced limited publicly announced breakthroughs on the most contentious economic issues.
For Wall Street, the immediate focus remains the interaction between AI-driven earnings growth and increasingly restrictive financial conditions.
AI investment is still providing a powerful source of economic and corporate momentum. Microsoft, Qualcomm, Dell and Akamai all offered fresh evidence of that spending cycle this week.
But with the 10-year Treasury yield approaching 5.2%, oil above $100 and markets assigning a rising probability to another Fed rate increase, investors are confronting a higher hurdle for virtually every asset.
The result is a market where AI optimism remains powerful, but increasingly has to compete with the mathematics of higher interest rates and more expensive energy.