Key facts
- The S&P 500 rose 15% and the Nasdaq 100 gained 28% in the second quarter of 2026.
- The Philadelphia Semiconductor Index (SOX) surged 88% in the quarter.
- The Russell 2000 index of small-cap stocks rose 21% in the second quarter.
- Energy stocks experienced declines due to falling crude oil prices.
The second quarter of 2026 proved to be a historic period for the stock market, marked by significant gains across major indices, largely driven by enthusiasm for artificial intelligence investments. The S&P 500 climbed 15% and the Nasdaq 100 surged 28%, their best quarters since 2020. This rally was fueled by investor confidence in the substantial spending on AI capital expenditures by tech companies, despite some sector-specific exceptions.
Chipmakers were a standout performer, with the Philadelphia Semiconductor Index (SOX) achieving a record 88% surge. Individual companies like Micron, Intel, Marvell Technology, and AMD saw substantial gains, with Sandisk also experiencing a significant rise. This strong performance in semiconductors contributed to the broader tech sector's success.
Small-cap stocks also demonstrated robust performance, with the Russell 2000 index gaining 21% in the quarter and posting its best first half of a year since 1991. This indicates an improvement in stock market breadth, countering previous concerns about a top-heavy market.
In contrast, energy stocks experienced their worst quarter since 2020, a decline attributed to plummeting crude oil prices. This drop in oil prices helped alleviate some inflation concerns, allowing investors to shift focus towards the growth potential of AI.
Despite the overall positive quarter, some weakness emerged in June, particularly affecting software stocks and AI hyperscalers such as Microsoft and Oracle. Looking ahead, investors will be closely monitoring the Federal Reserve's next moves under new Chair Kevin Warsh regarding interest rates. Additionally, upcoming earnings reports from the Magnificent 7 (excluding Nvidia) are anticipated to be a critical factor for the market.