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
This page contains affiliate links. If you purchase through our links, we may earn a commission at no extra cost to you.

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

Key takeaways

U.S. stock indices reached or approached record highs in late May 2026. This occurred alongside an active conflict in the Middle East, the effective closure of the Strait of Hormuz, and core inflation at a three-year high.

Five forces support the current levels: roughly $1 trillion in planned AI data-center spending, strong revenue growth for the companies supplying that build-out, sustained inflows into passive index funds and ETFs, behavioral pressure from FOMO and TINA, and solid corporate earnings. Each of these forces is measurable. Each can also reverse.

The companion article examines the risks that could unwind this setup.

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.

U.S. indices are near record highs in late May 2026. The S&P 500 sits near 7,519, the Nasdaq above 26,650, and the Dow around 50,460. The Dow has printed fresh records on multiple sessions this month.

At the same time, the U.S.–Israel conflict with Iran that began in late February continues. The Strait of Hormuz has been effectively closed since early March. Core PCE inflation came in at 3.8% for April, the highest reading in nearly three years. Consumer confidence fell again in May, with the Conference Board citing the Middle East conflict as a key factor.

Several measurable forces are supporting current price levels despite these conditions.

1. AI capital spending

Research firm Dell'Oro Group projects that global data-center capital expenditure will approach $1 trillion in 2026, rising toward $1.7 trillion by 2030. This pace is arriving years ahead of earlier forecasts.

The largest technology companies are driving most of the spending. Alphabet, Amazon, Microsoft, and Meta together plan to spend roughly $725 billion on capex in 2026, according to first-quarter earnings compiled by the Financial Times. This represents an increase of about 77% from the previous year.

Individual budgets are large. Microsoft guided to around $190 billion for the calendar year. Amazon’s budget runs near $200 billion. Meta raised its range to $125–145 billion. Additional projects, including OpenAI’s planned “Stargate” infrastructure program and various sovereign AI initiatives, add further scale.

This spending creates revenue and earnings for suppliers in the supply chain.

2. Suppliers to the AI build-out

Companies that provide equipment and infrastructure for AI data centers have seen strong growth.

Memory-chip maker Micron’s stock rose more than 200% in 2026 and crossed a $1 trillion market cap. Dell’s data-center and server business grew 181% year over year in its most recent quarter and now accounts for nearly two-thirds of that unit’s revenue.

Growth extends beyond chips. Electricity producers are seeing demand from data-center operators. Microsoft has disclosed an Azure order backlog it cannot fill due to power constraints. Contractors, cooling and networking vendors, and local governments hosting large campuses are also receiving orders. These businesses are booking real revenue from current projects.

3. The passive-investing flywheel

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.

When money flows into an S&P 500 index fund, the manager buys the stocks in the index. Because the index is weighted by market size, the largest companies receive the biggest share of new inflows, whether or not their fundamentals justify it. This buying lifts prices, which attracts more inflows, which drives further buying.

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 highly concentrated market. The largest seven companies now account for roughly a third to 40% of the S&P 500’s total value.

4. FOMO and TINA

FOMO (fear of missing out) describes the pressure investors feel when others appear to be profiting while they remain in cash. TINA (“there is no alternative”) refers to the view that holding money in low-yielding cash or bonds is unattractive when equities appear to offer much higher returns.

Neither concept is based on fundamental analysis. Both are behavioral factors that can drive money into equities.

5. Corporate earnings and energy security

Corporate earnings have been solid. Roughly 84% of S&P 500 companies beat their first-quarter 2026 earnings estimates. The U.S. is also more energy self-sufficient than during previous oil shocks. Even with higher oil prices from the Hormuz disruption, the risk of gas lines similar to the 1970s is low.

Risks on the horizon

The forces described above can move in the opposite direction. The market appears to be pricing in a relatively smooth resolution to several open risks, including a quick reopening of the Strait of Hormuz and strong returns from the current wave of AI investment. A passive-investing bid that has only been tested during rising markets also carries uncertainty.

The companion article examines the potential cracks beneath current price levels and positioning considerations.

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.

Sources

Share this on X →

More Articles