Nasdaq falls on AI boost, debt ceiling talks awaited

On May 25th, the tech-heavy Nasdaq trailed Wall Street gains as Nvidia shares soared on a blowout forecast that lifted other AI-related companies, while investors watched for signs of progress in US debt ceiling talks.

Nvidia's shares surged 25.5 percent to hit a record-breaking high, as it forecast quarterly revenue 50 per cent higher than Wall Street forecasts, and said it was ramping up supply to meet demand for its artificial intelligence chips.

Microsoft Corp and Alphabet Inc both rose about 2.2 per cent and 1.7 per cent, respectively, while the Philadelphia SE Semiconductor index rose 4.6 per cent to its highest level in more than a year.

The word of the month is AI, said Sam Stovall, chief investment strategist at CFRA Research in New York. Investors are looking for any area of growth, and right now that happens to be semiconductors. Other chip companies, such as Advanced Micro Devices Inc Micron Technology Inc and Broadcom Inc, rose 2.6 per cent to 9.5 per cent.

Intel, which has little AI exposure, fell 5.7 per cent in early morning trading.

Wall Street's main indexes have dropped sharply in the past two sessions and could log their worst week in two months in more than two months as investors await clarification on whether lawmakers will strike a deal to raise the US $31.4 trillion debt ceiling or risk a calamitous default.

Later in the day, the White House and congressional Republicans resume negotiations to try to reach a deal as the June 1 deadline looms large.

The US House speaker, Kevin McCarthy, told Fox News he was unsure if the two sides would reach a deal on Thursday.

In response to the market uncertainty, yields on US Treasury bills maturing in early June rose above 7 percent, while two-year yields hit their highest since March, after ratings agencies Fitch and DBRS Morningstar put the United States on credit watch for a possible downgrade.

The number of Americans filing claims for unemployment benefits rose only moderately last week, while a Commerce Department report confirmed economic growth slowed in the first quarter.

At 10:03am, the Dow Jones Industrial Average was down 37.98 points, or 0.12 percent, at 32,761. The S&P 500 was up 23.37, or 0.57 percent, at 4,138. 61, and the Nasdaq Composite was up 159.10 points, or 1.27 percent, at 12643. The luxury brand rose 8.6 per cent on the back of earnings based on profit forecasts.

Best Buy's earnings rose 3.7 percent after the electronics giant beat quarterly profit predictions, while discount retailer Dollar Tree Inc fell 15.0 per cent on cutting its annual profit outlook.

Declining issues outnumbered advancers by a ratio of 1.46 to -1 on the NYSE and by a ratio of 1.47 to -1 on the Nasdaq.

The S&P index had six new 52 week highs and 21 new lows, while the Nasdaq recorded 32 new highs and 62 new lows.