U.S. Stocks Hit New Highs After Strong Q2 — Wall Street Sees More Upside Ahead

Tradingkey - U.S. stocks ended Q2 with a strong finish on June 30. The S&P 500 hit a fresh all-time high—the first since February—while the tech-heavy Nasdaq Composite logged its first new peak since December. The latest leg up reflects improving investor sentiment, with mega-cap tech and semiconductor stocks serving as the key drivers behind the market’s rebound.

Tech and Semiconductors Take the Lead

AI giants and chipmakers were front and center. Nvidia (NVDA) made headlines again by reclaiming its spot as the world’s most valuable company, with a market cap nearing $4 trillion. Shares have rallied nearly 50% since early April's lows.

Broadcom (AVGO) also hit a fresh all-time high this week. While the company’s latest earnings were solid but not impressive, investors are increasingly confident in its long-term opportunity in custom ASIC solutions, especially for AI. That’s helped drive steady strength in the stock.

Meanwhile, other names across the AI ecosystem also made big moves. CoreWeave — a GPU cloud provider closely tied to Nvidia’s infrastructure — saw its valuation surge more than 3x in just one quarter. Palantir (PLTR), known for its long-standing government contracts, rallied 50% in Q2, with a contract renewal rate north of 90%.

Tesla (TSLA) continues to be a wild ride, but investors haven’t taken their eyes off it. The company officially launched its Robotaxi service in Texas, and progress on its humanoid robot “Optimus” is moving faster than expected. These developments helped push the stock up nearly 25% in recent weeks.

Notably, leadership could continue through 2025. “Tech has been outperforming the markets since the April lows and we would expect tech’s leadership to continue in the second half of 2025, especially as investors start to resume their excitement about the promise of artificial intelligence, which had faded during the midst of the tariff selloff in March and April,” Clark Bellin, president and CIO at Bellwether Wealth, said in an email.

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Trade Optimism Adds Fuel

Easing global trade tensions are another positive catalyst. Recent deals between the U.S., China, and the U.K. have revived hopes that a full-blown global trade war could be avoided. Market watchers are now focused on the July 9 tariff deadline set by Trump, hoping for further progress before then.

Canada, for instance, made a surprise move over the weekend—just hours before implementing a digital services tax, the country called it off. The decision came shortly after Trump paused U.S.-Canada talks, arguing the tax unfairly targeted American tech firms. Canada’s reversal is seen as a diplomatic signal to de-escalate the dispute and avoid triggering further tariffs.

Still, Treasury Secretary Scott Bessant warned Monday that unless Trump formally delays implementation, the risk of broad tariff hikes remains—despite constructive discussions underway.

Besides trade, all eyes are now on Capitol Hill. Senate Republicans are pushing to pass Trump’s proposed tax cuts and spending plan ahead of the July 4 holiday. The plan would add over 3 trillion to the federal debt, which already stands at a record 36.2 trillion — but for now, markets seem more focused on growth potential than debt risks.

Early Cut on the Table

The prospect of Fed rate cuts is also helping to boost risk assets. Fed Chair Powell noted during the ECB’s annual forum this week that tariff-driven inflation could begin to surface over the summer and emphasized the need to closely monitor how trade policy impacts inflation. However, he also noted that a clear majority of Fed officials still expect to cut interest rates later this year.

Fed Governor Christopher Waller went a step further, saying that if incoming data stays soft, the first rate cut could come as soon as July.

So far, inflation data tied to tariffs has been underwhelming, and the U.S. labor market is beginning to show cracks. The June jobs report hinted at persistent labor market softness, which strengthens the argument for cutting sooner rather than later.

Moreover, recent ceasefire between Israel and Iran has helped calm the broader macro backdrop, giving risk assets more room to run.

Wall Street Turning More Bullish

Wall Street analysts are increasingly bullish on where equities are headed. According to a CNBC survey, the majority of forecasters expect further upside. Fundstrat’s Tom Lee raised his year-end S&P 500 price target to 6,600, citing both resilient fundamentals and reduced geopolitical tail risk.

He also referenced the “TACO” theory — short for “Trump Always Chickens Out.” First floated in a Financial Times piece, the theory argues that markets have learned to discount Trump’s more extreme trade rhetoric, assuming he’ll ultimately walk it back. The idea has gained traction among some institutional managers as a framework for evaluating trade risk.

In addition, strong earnings and sales growth expectations into 2026 add to the bull case. Dubravko Lakos-Bujas, Chief U.S. Strategist at JPMorgan, forecasts double-digit growth in S&P 500 earnings by FY2026. He cautions that current valuations are high and may limit short-term upside, but adds: “Elevated valuation could limit market upside, but it is rarely a sell catalyst on its own, especially if the U.S. continues to deliver stronger growth relative to DM peers and the AI story remains intact.”

ETFs to Watch — For Tech and Broad Market Exposure

For investors looking to ride the momentum, here are some high-conviction ETFs tied to the tech rally and overall U.S. market:

 Tech Sector Broad Exposure

- Invesco QQQ Trust (QQQ):
Tracks the Nasdaq-100 with large positions in Apple, Microsoft, Nvidia, and Amazon.

- Invesco NASDAQ 100 ETF (QQQM):
Same index exposure as QQQ but at a lower cost, ideal for long-term holders.

- Technology Select Sector SPDR Fund (XLK):
Focuses on tech names within the S&P 500 — top holdings include Microsoft, Apple, Nvidia, and Broadcom.

 Semiconductors

- iShares Semiconductor ETF (SOXX):
Holds major chipmakers like Nvidia, Qualcomm, AMD, and Texas Instruments.

- VanEck Semiconductor ETF (SMH):
Key holdings include TSMC, Nvidia, ASML, Intel, and AMD.

 Internet & AI Growth

- First Trust Dow Jones Internet ETF (FDN):
Includes large internet platforms like Amazon, Meta, Alphabet, and Netflix.

- Global X AI & Technology ETF (AIQ):
Focuses on AI-driven stocks such as Microsoft, Nvidia, Meta, AMD.

 Index Wide Exposure

- Fidelity Nasdaq Composite Index ETF (ONEQ):
Offers full exposure to all Nasdaq-listed names, spanning growth and tech.

- SPDR S&P 500 ETF Trust (SPY):
Provides broad S&P 500 exposure, with a heavy allocation to tech.

- ARK Innovation ETF (ARKK):
Actively managed, targeting “next-gen” disruptors like Tesla, Coinbase, and Roku.