OpinionMay 28, 2026

Why Stocks Keep Hitting Records While the World Looks Like It's on Fire

Stocks are near record highs despite war, an oil shock, and 3-year-high inflation. The five forces holding the rally up — from the $1T AI boom to the passive flywheel.

By the TradeRoom Live Editorial TeamReviewed May 28, 2026
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Why Stocks Keep Hitting Records While the World Looks Like It's on Fire

Key takeaways

U.S. indices are sitting at or near record highs in late May 2026 — even with a shooting war in the Middle East, the Strait of Hormuz effectively shut, and core inflation at a three-year high. Five forces explain the disconnect: a roughly $1 trillion AI data-center build-out, the "picks-and-shovels" suppliers cashing in on it, a self-reinforcing passive-investing flywheel, the FOMO/TINA psychology pulling cash off the sidelines, and genuinely strong corporate earnings. All five are real — and all five can run in reverse, which is the subject of the companion piece.

Pull up a chart of the major U.S. indices and you'd never guess the headlines. As of late May 2026, the S&P 500 is sitting near 7,519, the Nasdaq above 26,650, and the Dow around 50,460 — all at or within a whisker of record highs. The Dow has printed fresh records on multiple sessions this month alone.

Now read the rest of the front page. The U.S.–Israel conflict with Iran that began in late February is still grinding on. The Strait of Hormuz — the chokepoint for roughly a fifth of the world's oil — has been effectively shut since early March. The Commerce Department's preferred inflation gauge, core PCE, came in at 3.8% for April, the highest reading in nearly three years. Consumer confidence slipped again in May, with the Conference Board pointing directly at the Middle East conflict.

So how do you square record stock prices with what feels like an unusually dangerous moment? It isn't one thing. It's a stack of powerful forces — some rational, some behavioral — all pushing in the same direction. Here are the five that matter most.

Five forces lifting the market What keeps pushing indices to record highs record highs → AI capex ~$1 trillion data-center build-out Picks & shovels chips, power, builders cash in Passive flywheel >50% of U.S. fund assets now index-tracked FOMO + TINA cash feels foolish at 4% Strong earnings 84% beat Q1 estimates
Four of these five forces have little to do with classic valuation — yet together they form a powerful, durable bid under the market.

1. The AI capital-spending tsunami

The single biggest engine under this market is the artificial-intelligence build-out, and the numbers are staggering. Research firm Dell'Oro Group projects that global data-center capital expenditure will approach $1 trillion in 2026 on its way to $1.7 trillion by 2030 — a milestone analysts there admit is arriving years ahead of schedule.

The "hyperscalers" are leading the charge. According to first-quarter earnings compiled by the Financial Times, Alphabet, Amazon, Microsoft, and Meta together plan to spend roughly $725 billion on capex in 2026 — up about 77% from last year's record. Microsoft alone guided to around $190 billion for the calendar year; Amazon's budget runs near $200 billion; Meta lifted its range toward $125–145 billion. Layer on OpenAI's $500 billion "Stargate" infrastructure program and a wave of "neocloud" and sovereign-AI projects, and you have a once-in-a-generation wall of investment hitting the economy all at once.

That spending shows up as revenue and earnings somewhere — and right now, it's flowing straight into the companies that supply the picks and shovels.

2. The picks-and-shovels trade

The old gold-rush wisdom says the people who got rich weren't the miners; they were the merchants selling shovels, jeans, and supplies. The AI gold rush is following the same script, and the suppliers are doing spectacularly well regardless of whether AI ever lives up to the hype.

Look at the memory-chip maker Micron: its stock has soared more than 200% in 2026 and crossed a $1 trillion market cap, as Wall Street woke up to how much memory AI training devours. Or Dell, whose data-center and server business grew 181% year over year in its most recent quarter — now nearly two-thirds of that unit's revenue.

The shovel-sellers go well beyond chips. They include the electricity producers powering these farms (Microsoft has disclosed an Azure order backlog it literally can't fill because of power constraints), the contractors building the facilities, the cooling and networking vendors, and even the small towns landing multi-billion-dollar campuses. These are real businesses booking real orders today — which is exactly why the trade has been so durable.

3. The passive-investing flywheel

Here's the structural force most people never think about. A majority of American equity-fund wealth now sits in index funds and ETFs. In early 2026, passive vehicles passed 50% of all U.S. equity fund assets for the first time — north of 54% by some counts, according to Bloomberg Intelligence.

The mechanics are self-reinforcing. When money flows into an S&P 500 index fund, the manager mechanically buys the index's stocks — and because the index is weighted by size, the biggest names get the most new money, whether or not their fundamentals justify it. That buying lifts prices, which attracts more inflows, which drives more buying. No stock-picking skill required: you buy the index, sit back, and ride the feedback loop.

The passive-investing flywheel Why index inflows become self-reinforcing Money flows into index funds Funds buy the index — biggest names get most Prices rise Higher prices pull in more inflows ↻ self-reinforcing
The loop needs no stock-picking skill — and it runs just as efficiently in reverse, which is the danger explored in the companion piece.

The result is a market that's never been more top-heavy. Depending on how you count, the largest seven companies now make up somewhere between roughly a third and 40% of the S&P 500's entire value. On the way up, that concentration has been a feature, not a bug.

4. FOMO and TINA

Two acronyms capture the psychology. FOMO — fear of missing out — is what you feel when everyone at the dinner table is bragging about their gains and you're sitting in cash. TINA — "there is no alternative" — is the nagging sense that parking money in a 4% money-market fund is foolish when stocks seem to promise 10% as far as the eye can see.

Neither has anything to do with fundamental analysis. Both are extraordinarily powerful drivers of human behavior, and right now they're pulling money off the sidelines and into equities every single day.

5. There are real fundamentals here, too

It would be a mistake to write the whole rally off as a sugar high. Corporate America is genuinely delivering. Roughly 84% of S&P 500 companies beat their first-quarter 2026 earnings estimates — among the strongest beat rates in years. The U.S. is also far more energy self-sufficient than it was in the 1970s, which is a meaningful cushion: even with oil prices elevated by the Hormuz shock, America is unlikely to see the gas lines that crippled earlier decades.

Strong profits, an AI investment boom, a structural bid from passive flows, and powerful behavioral tailwinds — that's a serious case for why stocks can keep climbing a wall of worry.

The catch

All of this is true. It's also exactly the kind of setup that lulls investors to sleep. Every force described above can run in reverse, and the market is currently pricing in a benign resolution to risks that are anything but resolved — a quick reopening of the Strait of Hormuz, an AI payoff that has yet to actually arrive, and a passive flywheel that has only ever been tested on the way up.

That's the other half of the story — the cracks forming beneath the record highs, and what a prepared investor can do about them. We'll take that on in the companion piece.

Stay locked in...

/Kimere

This article is market commentary for educational purposes and is not investment advice. It does not account for your individual circumstances. Markets carry risk, including loss of principal. Do your own research and consider consulting a licensed financial professional before making investment decisions.

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