Kelly Evans, Co-Host of CNBC's Power Lunch

Torrey Kleinman | CNBC

The Nasdaq 100 hit a record high yesterday. The S&P 500 is less than 1% away. And guess what? A familiar trade has been leading the way from the early-April "Liberation Day" lows. Namely, NVIDIA and the whole AI space. 

Shares of NVIDIA are popping on the open again today, and are trading back above their record closing high from January. And if you think that's all froth and momentum, we've got chip analyst Vivek Arya on the show later today to explain why he thinks earnings estimates for the stock are still too conservative. 

Meanwhile, once-sleepy Micron is up 50% year-to-date (and reports after the bell tonight). Their high-speed memory chips are a key part of NVIDIA's cutting-edge AI chips. We asked Stacy Rasgon of Bernstein a couple weeks back why the chip trade has been so strong lately and he said basically: the easing of tariffs, the resilient U.S. economy, and continued strong investment in AI. 

That's why the S&P tech sector is already back at a record high. But that's not all: the industrials also touched a record high yesterday, and the financials, of all things, are less than 1% away. Simply put, aside from the blistering AI trade, the consumer and the broader U.S. economy have been surprisingly strong after the confidence shock from tariffs. 

Goldman had a big note this morning on how even the subprime consumer is "exhibiting resilience and improvement" despite lingering inflation and economic uncertainty. They are tracking positive spending growth in this cohort, and improving delinquency trends on credit cards. Hence their buy ratings on stocks from Dollar Tree to Synchrony Financial to Affirm. 

Suddenly, all those 6,500 S&P price targets from earlier this year don't look so unachievable anymore. We already touched 6,100 on the index yesterday. The only thing to fear at this point, to paraphrase Ed Yardeni, is the lack of fear itself. CNN's "Fear & Greed" gauge is already back in Greed territory, as technicians are warning the S&P is starting to look a little overbought. 

But Binky Chadha of Deutsche Bank yesterday told us that the market is broadly under-owned by major institutions, and he expects stronger demand plus continued stock buybacks to power the market to 6,550 or so by year-end. And that's even if escalating tariffs or geopolitical flare-ups briefly enter the picture again. 

The biggest laggards in this surprisingly sharp rally are precisely those areas where the growth outlook is simply less impressive. The small-caps, for instance, which have struggled for years with high interest rates (and have less AI exposure). The Russell 2000 is still 12% below its all-time high. Energy and healthcare are also still down more than 10% from their highs. 

All of which is to say, this rebound isn't totally illogical. And corporations are about to get what amounts to something like a tax cut from the permanent expensing provisions in the president's "Big Beautiful Bill" that is working its way through Congress. Add it all up, and that's how you get a stock market that is basically back to all-time highs. 

See you at 1 p.m!

Kelly