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The Nasdaq ended sharply higher on Thursday after Alphabet and Advanced Micro Devices sparked a megacap rally on fresh optimism about artificial intelligence.

Shares of Alphabet jumped 5.3% as analysts cheered the launch of the Google-parent’s newest AI model, while AMD soared nearly 10% after the company estimated the potential market for its data centre AI chips could reach US$45 billion this year.

Other heavyweight tech-related stocks also gained, with Nvidia and Meta Platforms rising over 2%, Amazon up 1.6% and Apple 1% higher.

The Philadelphia semiconductor index jumped 2.8%, increasing its 2023 gain to 48%, much of that fueled by bets about the future of AI.

“Today it’s an AMD-Google rally. There’s a contagion effect across the market. Everyone wants to get on the bandwagon,” said Jay Hatfield, CEO of Infrastructure Capital Management in New York. “We’re kind of in this weird market, a tag-team market, where one day tech leads, and then the next day value and the broad market lead.”

Trading was more subdued in Canada, where gains for technology shares offset further pressure on the energy sector, while investors awaited U.S. jobs data for signs that interest rates could have peaked.

The Toronto Stock Exchange’s S&P/TSX composite index ended up 4.3 points, or 0.02%, at 20,278.51. It follows three straight days of declines after the index posted on Friday its highest closing level in two and a half months.

The Toronto market’s technology sector rose 0.8% and utilities were up 0.5%.

The energy sector fell to its lowest level since July 21, down 0.9% as the price of oil extended its recent decline. U.S. crude oil futures settled 4 cents lower at US$69.34 a barrel.

The S&P 500 has steadily climbed since the end of October on expectations the Federal Reserve has finished its campaign of interest rate hikes and that it could begin cutting rates in March. Interest rate futures imply a nearly 64% chance of a rate cut as soon as March, according to the CME Group’s FedWatch tool.

On Thursday, the S&P 500 index climbed 0.80% to end the session at 4,585.59 points, with 1.8 stocks in the index gaining for each one that fell.

The Nasdaq Composite jumped 1.37% to 14,339.99 points, while Dow Jones Industrial Average rose 0.18% to 36,117.57 points.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits increased less than expected last week to a seasonally adjusted 220,000 for the week.

A Labor Department jobs report due on Friday could hint at how quickly the U.S. economy is softening and may sway expectations about when the Fed is likely to begin cutting rates. Non-farm payrolls are expected to have increased by 180,000 jobs last month after rising by 150,000 in October.

The most traded stock in the S&P 500 was Tesla, with US$25.7 billion worth of shares changing hands during the session. The shares rose 1.37%.

Volume on U.S. exchanges was relatively heavy, with 11.2 billion shares traded, compared to an average of 10.8 billion shares over the previous 20 sessions.

Limiting gains in the Dow, shares of Merck fell 1.7% after the drugmaker’s immunotherapy combination failed in a lung cancer study.

Reuters, Globe staff

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