The Nasdaq ended sharply higher on Thursday, as Micron Technology fueled a rally in chip stocks that eclipsed fears that US and Iranian attacks could prolong the Middle East conflict and fuel inflation.

Tehran said it attacked US military targets in Kuwait, Qatar and Bahrain following a US strike against Iran on Wednesday. The PHLX chip index rose for a second consecutive positive session.

Micron Technology surged after the company planned to invest more than $250 billion in the US by 2035, to capitalize on demand for memory chips to supply a boom in artificial intelligence.

Applied Materials and SanDisk also rose.

AI-related stocks have been volatile recently as investors worry about the sustainability of the rally that helped Wall Street reach record levels in 2026.

“This is still very much an AI bull market. For a while, it was starting to widen, but that’s dependent on oil prices and interest rates holding steady, and with this flare-up in the Middle East, that calls that part of the bull market into question,” said Ross Maystild, Lokiville at Cantuville Investment Strategies.

Meta Platform rose after Reuters reported that the company plans to start manufacturing AI chips in September.

According to preliminary data, the S&P 500 rose 59.12 points, or 0.79%, to close at 7,541.83 points, while the Nasdaq Composite gained 328.11 points, or 1.27%, to close at 26,198.76. The Dow Jones Industrial Average rose 133.31 points, or 0.25%, to 52,481.70.

With the quarterly reporting season set to begin, analysts on average expect S&P 500 earnings to rise 24% year-over-year, with technology companies accounting for the bulk, according to LSEG I/B/E/S.

The S&P 500 is trading at about 20 times expected earnings, up from 21 a month ago.

The number of Americans filing claims for unemployment benefits fell last week, suggesting the labor market remained steady despite a slowdown in job growth in June.

The Federal Reserve kept interest rates unchanged at its June meeting under new chairman Kevin Warsh, but minutes released Wednesday showed some policymakers saw a case for raising borrowing costs before ultimately agreeing to hold steady.

According to CME’s FedWatch tool, traders are eyeing a possible 25-basis-point rate hike through the Fed’s December meeting. PepsiCo fell even as the snack and soda giant beat second-quarter revenue estimates.

Shares of Costco Wholesale sank to a six-month low after the retailer reported a decline in comparable sales for June.