S&P 500 Breaks 7,600 as AI Boom Drives Nine-Day Rally, June 03

The S&P 500 closed at 7,609.78 on June 2, breaking above 7,600 for the first time in history. Semiconductor and AI infrastructure stocks led the rally, with Marvell Technology jumping 32% after Nvidia CEO Jensen Huang called it a potential trillion-dollar company. The index extended its winning streak to nine consecutive days, its longest run since May 2025. However, forward valuations now sit at 23x earnings, well above the historical average of 18x, raising questions about future returns.

Chip Stocks Fuel Record Close

Semiconductor stocks powered the S&P 500 to its historic close. Marvell Technology soared 32% after Huang’s remarks at a Taiwan conference. Hewlett Packard Enterprise jumped 19% after beating earnings expectations and raising full-year guidance on AI server demand. Broadcom rose 5% ahead of quarterly results. The Philadelphia Semiconductor Index surged nearly 6%, becoming the main engine of Tuesday’s gains.

Valuation Concerns Emerge at Record Highs

The S&P 500’s forward price-to-earnings ratio now sits at 23x, compared to the historical average of 18x. Historically, when the index traded at this valuation level, subsequent five-year returns clustered below the long-run average of roughly 9% annualized. The top 10 companies in the index now represent 40.6% of market capitalization, marking a sharp reversal from the broader market leadership seen in March. Analysts note that buying at record highs delivers thinner forward returns than buying at average valuations.

Alphabet Raises $80 Billion While Market Diverges

Alphabet announced an $80 billion stock sale to fund AI spending, with Berkshire Hathaway committing $10 billion. The Google parent plans to spend as much as $190 billion on equipment and investments this year. Despite AI enthusiasm, Alphabet stock fell 3.8% on the announcement, highlighting the dispersion running through the AI trade. Options positioning shows protective put structures pointing to hedging activity into the June macro calendar, even as upside call demand persists in tech-focused ETFs.

Meyka’s Outlook and Technical Signals

Meyka rates the S&P 500 a C+ with a 12-month target of $7,250.83, implying 4.7% downside from current levels. The RSI stands at 67.67, signaling overbought conditions, while the ADX at 31.38 confirms a strong trend. The Stochastic indicator at 89.19 suggests momentum is stretched. With valuations elevated and technical indicators flashing caution, the data points to limited upside and heightened risk of a pullback.

Final Thoughts

The S&P 500’s record close masks a narrowing rally driven by AI concentration and stretched valuations. Meyka’s C+ grade and $7,250.83 target suggest downside risk outweighs upside potential from current levels.

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The content shared by Meyka AI PTY LTD is solely for research and informational purposes.  Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice.