Dow, S&P 500 Hit Record Highs as Micron Returns to Trillion-Dollar Market Cap Amid Structural AI Trade Recovery

TradingKey — On August 4, Eastern Time, US stock risk appetite rebounded, with both the Dow Jones Industrial Average and the S&P 500 Index hitting historic highs. Market focus is shifting from the previously highly concentrated AI trade toward a broader rally supported by corporate earnings, sector rotation, and improving liquidity.

As of press time, the Dow Jones Industrial Average rose 1.67% to 54,067.17 points; the Nasdaq Composite Index gained 2.08% to 26,454.18 points; and the S&P 500 Index increased 1.46% to 7,711.45 points.

Source: FutuBull

The Dow's lead was primarily driven by industrial giant Caterpillar ( CAT )'s strong performance. As a heavily weighted component of the Dow, Caterpillar's sharp post-earnings rally boosted blue-chip sentiment; Palantir ( PLTR) also rose on the back of better-than-expected earnings.

Meanwhile, AI trading returned as the main market driver today. As of press time, the Philadelphia Semiconductor Index surged 6.21% to 11,440.22 points. Among them, Arm ( ARM) rose 14.89%, Intel ( INTC) climbed 9.82%, AMD ( AMD) gained 7.91%, Qualcomm ( QCOM) rose 7.42%, and Nvidia ( NVDA) edged up 1.95%.

Memory stocks also performed strongly, with SanDisk ( SNDK) surging 10.46%, and Micron Technology ( MU) rising 7.87%.

Despite the recent sharp volatility in AI themes, UBS strategist Keith Parker believes this resembles a healthy rebalancing within a bull market. In July, the S&P 500 was essentially flat, while the US momentum factor ETF MTUM fell 13%, forming a rare divergence. UBS believes that capital has not abandoned AI, but is instead starting to broaden out to high-quality non-AI targets while the AI cycle is still in its early stages; the strength of Caterpillar and Palantir reflects that market breadth is improving.

In addition, geopolitical uncertainties have also eased. As negotiations between the US and Iran continue and ceasefire expectations rise, Brent crude futures pulled back to around $81 per barrel, and WTI crude futures slid to around $78. With earnings resilience holding up, investors' tolerance for short-term disruptions from geopolitics and AI trading has increased.

Citadel Securities believes that the volatility of the past month was a technical reset completed through rotation, deleveraging, and fundamental improvements, rather than macro deterioration. Its data shows that S&P 500 second-quarter earnings growth expectations have been revised upward to approximately 45% from 22.4% at the beginning of the earnings season; with the lifting of blackout periods, the corporate buyback coverage rate is expected to rise to about 85% by mid-August, and capital supply-demand dynamics are poised to improve further.

Goldman Sachs also views earnings as a key pillar: the tracking value of the S&P 500's second-quarter EPS year-over-year growth rate reached 45%, and even excluding some non-recurring income, it still reached 26%, one of the fastest paces since 2021. The de-bubbling of positioning paired with upward revisions in earnings expectations provided the foundation for the indexes to hit new highs. Whether the market can sustain its upward momentum in the future still depends on whether earnings improvements can continue and broaden into more sectors.