Jen-Hsun Huang, president and chief executive officer of Nvidia Corp., speaks during the company’s Mobile World Congress Americas event in Los Angeles, California, U.S., Monday, Oct. 21, 2019.

Patrick T. Fallon | Bloomberg | Getty Images

Forget the debt ceiling. Tech investors are in buying mode.

The Nasdaq The Composite completed its fifth straight weekly gain on Friday, jumping 2.5% over the past five days and is now up 24% this year, well ahead of other major U.S. indexes. The S&P 500 is up 9.5% for the year, while the Dow Jones Industrial Average is down 2%.

The hype around the chip maker Nvidia company earnings report and AI technology lead led to rally this week, but investors also sold off stocks Microsoft, Meta and Alphabeteach of which has its own history of artificial intelligence.

And with growing optimism that lawmakers are close to a deal on raising the debt ceiling and that the Federal Reserve may be slowing the pace of interest rate hikes, the stock market is starting to look less like 2022 and more like a tech-happy decade , which preceded it.

“The focus on these mega-cap tech stocks has been the place to be in this market,” Victoria Green, chief investment officer at G Squared Private Wealth, told CNBC’s “Worldwide Exchange” on Friday morning. “You can’t deny the potential of AI, you can’t deny the prowess of profit that these companies have.”

At the beginning of the year, layoffs and cost-cutting were the main topics in technology. Many of the industry’s largest companies, including Meta, Alphabet, Amazon and Microsoft, cut thousands of jobs after a dismal 2022 to boost earnings and share prices. In earnings reports, they emphasized efficiency and their ability to “do more with less,” a theme that resonated with the Wall Street crowd.

But now that companies are demonstrating real-world applications of the long-hyped technology, investors have turned their attention to artificial intelligence. OpenAI exploded after the release of chatbot ChatGPT last year, and its biggest investor, Microsoft, is building the underlying technology into as many products as possible.

Google, meanwhile, touts its competing AI model at every opportunity, and Meta CEO Mark Zuckerberg would rather tell shareholders about his company’s AI achievements than the company’s money-losing efforts in the meta universe.

Enter Nvidia.

The chip maker, best known for its graphics processing units (GPUs) that power advanced video games, is riding the wave of artificial intelligence. Shares soared 25% to a record this week and lifted the company’s market capitalization to nearly $1 trillion after first-quarter earnings beat estimates.

Nvidia shares are up 167% this year, outperforming all companies in the S&P 500. The next three biggest gainers in the index are also technology companies: Meta, Advanced Micro Devices and Sales department.

Nvidia’s story is based on what’s to come, as its revenue fell 13% in its latest quarter from a year earlier due to a 38% drop in its gaming division. But the company’s sales forecast for the current quarter was about 50% higher than Wall Street estimates, and CEO Jensen Huang said Nvidia was seeing “sharp demand” for its data center products.

Nvidia said cloud providers and Internet companies are buying GPU chips and using the processors to train and deploy generative AI applications like ChatGPT.

“At this point in the cycle, I think it’s very important not to fight the consensus,” Brent Breislin, a cloud and software analyst at Piper Sandler, told CNBC’s “Squawk on the Street” on Friday.

“The consensus is that big gets bigger when it comes to AI. And I think that will continue to be the best way to leverage AI trends.”

Microsoft, which Bracelin recommends as a buy, is up 4.6% this week and is now up 39% for the year. Meta is up 6.7% for the week and is set to more than double in 2023 after losing nearly two-thirds of its value last year. Alphabet is up 1.5% this week, up 41% for the year.

One of the biggest headwinds for tech stocks last year was the central bank’s continued interest rate hikes. The hike continued into 2023, when the Fed’s target range rose to 5%-5.25% in early May. But at the Fed’s most recent meeting, some members indicated they were waiting for a slowdown in economic growth to obviate the need for further tightening, according to minutes released Wednesday.

Less aggressive monetary policy is seen as a sign of a boost in technology and other riskier assets, which have typically outperformed with more stable rates.

Still, some investors worry that the tech boom has gone too far, given the weaknesses that remain in the economy and government. A divided Congress complicates a deal on the debt ceiling as the Treasury Department’s June 1 deadline looms. Republican Rep. Garrett Graves of Louisiana told reporters Friday afternoon at the Capitol that “we still have serious issues where we haven’t bridged the divide.”

Ellie McCartney, managing director of UBS Private Wealth Management, told CNBC’s “Squawk on the Street” on Friday that after the recent rally in tech stocks, “it’s time to probably take some of that off the table.” She said her group has spent a lot of time looking at the venture capital market and where the deals are happening, and they’ve noticed some distinct froth.

“You’re either an artificial intelligence or you’re not,” McCartney said. “We really have to be prepared to see that we’re not going to get to the perfect debt ceiling unless we get the perfect landing, which is because at these levels we’re definitely going to have prices in the U.S. High for everything, and it seems an awfully shaky place, given the risks.”

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