US STOCKS-Nasdaq reaches record high close, AI stocks rally

By Noel Randewich and Johann M Cherian

Sept 22 (Reuters) - The Nasdaq notched a record high close on Tuesday, lifted by Micron Technology and other AI-related stocks, while the S&P 500 hovered just below a record high as oil prices traded around $100 per barrel.

Chip stocks added to recent gains while consumer-related software shares lost ground. Investors focused on the strong reception of Meta Platforms' AI assistant, which launched this month and can send emails and complete transactions on behalf of a user.

The success of the AI assistant, called Muse, has fueled gains for AI-related chip stocks in recent days. Yet some worried it could compete with retailers, online brokerages and other consumer companies. Amazon AMZN.O on Monday blocked the agent from shopping on its platform.

"There are a lot of tech stocks that are down today on Muse-related fears of one sort or another," said Jed Ellerbroek, portfolio manager at Argent Capital Management. "People fear that Muse will be used to manage your insurance relationships, book your travel and search for stuff to buy."

Ride-hailing apps Uber Technologies UBER.N and Lyft LYFT.O lost ground, while Expedia EXPE.O and Charles Schwab SCHW.N also fell.

Memory chipmakers Micron MU.O and SanDisk SNDK.O both rallied.

Oil prices were choppy near $100 a barrel, while the yield on the benchmark 10-year Treasury note hovered around 4.94% after US President Donald Trump warned in a speech to the UN General Assembly that he could "annihilate the Islamic Republic" if no deal is reached to end the Middle East conflict.

Investors also awaited a US-China summit on Thursday, with traders speculating the trade truce with Beijing could be extended and talks could touch on AI regulation.

"What people are looking for is at least the start of a conversation that maybe you can come up with some sort of global framework as opposed to fighting each other and having this race and so," said Joe Saluzzi, head of equity market structure research at Themis Trading.

According to preliminary data, the S&P 500 .SPX lost 0.43 points, or 0.01%, to end at 7,764.27 points, while the Nasdaq Composite .IXIC gained 121.15 points, or 0.45%, to 27,243.24. The Dow Jones Industrial Average .DJI fell 184.94 points, or 0.36%, to 51,863.89.

The S&P 500 was less than 1% below its August 13 record high close.

Even as it trades near record highs, the S&P 500 is valued at just under 19 times expected earnings, its lowest valuation since 2023, according to LSEG data. AI-related heavyweights are responsible for much of the recent increase in earnings expectations.

JPMorgan Chase JPM.N and Wells Fargo WFC.N both lost ground.

Boston Federal Reserve President Susan Collins wrote she supported last week’s interest rate increase, citing inflation risks.

New York Fed President John Williams said the Fed's framework for controlling short-term rates has been effective in supporting financial markets.

Traders see a 53% chance the Fed will increase interest rates by at least 25 basis points in October, the CME Group's FedWatch Tool showed.