Neglect in regards to the debt ceiling. Tech traders are in purchase mode.

The Nasdaq Composite closed out its fifth-straight weekly achieve on Friday, leaping 2.5% prior to now 5 days, and is now up 24% this yr, far outpacing the opposite main U.S. indexes. The S&P 500 is up 9.5% for the yr and the Dow Jones Industrial Common is down barely.

Pleasure surrounding chipmaker Nvidia’s blowout earnings report and its management place in synthetic intelligence know-how drove this week’s rally, however traders additionally snapped up shares of Microsoft, Meta and Alphabet, every of which have their very own AI story to inform.

And with optimism brewing that lawmakers are near a deal to boost the debt ceiling, and that the Federal Reserve could also be slowing its tempo of rate of interest hikes, this yr’s inventory market is beginning to look much less like 2022 and extra just like the tech-happy decade that preceded it.

“Being concentrated in these mega-cap tech shares has been the place to be on this market,” mentioned Victoria Greene, chief funding officer of G Squared Non-public Wealth, in an interview on CNBC’s “Worldwide Trade” Friday morning. “You can’t deny the potential in AI, you can not deny the earnings prowess that these firms have.”

To begin the yr, the primary theme in tech was layoffs and price cuts. Lots of the greatest firms within the business, together with Meta, Alphabet, Amazon and Microsoft, had been eliminating 1000’s of jobs following a dismal 2022 for income development and inventory costs. In earnings reviews, they emphasised effectivity and their potential to “do extra with much less,” a theme that resonates with the Wall Road crowd.

However traders have shifted their focus to AI now that firms are showcasing real-world functions of the long-hyped know-how. OpenAI has exploded after releasing the chatbot ChatGPT final yr, and its greatest investor, Microsoft, is embedding the core know-how in as many merchandise as it will possibly.

Google, in the meantime, is touting its rival AI mannequin at each alternative, and Meta CEO Mark Zuckerberg would a lot somewhat inform shareholders about his firm’s AI developments than the corporate’s money-bleeding metaverse efforts.

Enter Nvidia.

The chipmaker, recognized finest for its graphics processing items (GPUs) that energy superior video video games, is using the AI wave. The inventory soared 25% this week to a file and lifted the corporate’s market cap to just about $1 trillion after first-quarter earnings topped estimates.

Nvidia shares are actually up 167% this yr, topping all firms within the S&P 500. The following three prime gainers within the index are additionally tech firms: Meta, Superior Micro Gadgets and Salesforce.

The story for Nvidia relies on what’s coming, as its income within the newest quarter fell 13% from a yr earlier due to a 38% drop within the gaming division. However the firm’s gross sales forecast for the present quarter was roughly 50% increased than Wall Road estimates, and CEO Jensen Huang mentioned Nvidia is seeing “surging demand” for its information middle merchandise.

Nvidia mentioned cloud distributors and web firms are shopping for up GPU chips and utilizing the processors to coach and deploy generative AI functions like ChatGPT.

“At this level within the cycle, I feel it is actually essential to not battle consensus,” mentioned Brent Bracelin, an analyst at Piper Sandler who covers cloud and software program firms, in a Friday interview on CNBC’s “Squawk on the Road.”

“The consensus is, on AI, the massive get larger,” Bracelin mentioned. “And I feel that is going to proceed to be the easiest way to play the AI traits.”

Microsoft, which Bracelin recommends shopping for, rose 4.6% this week and is now up 39% for the yr. Meta gained 6.7% for the week and has greater than doubled in 2023 after dropping virtually two-thirds of its worth final yr. Alphabet rose 1.5% this week, bringing its enhance for the yr to 41%.

One of many greatest drags on tech shares final yr was the central financial institution’s constant rate of interest hikes. The will increase have continued into 2023, with the fed funds goal vary climbing to five%-5.25% in early Might. However on the final Fed assembly, some members indicated that they anticipated a slowdown in financial development to take away the necessity for additional tightening, in keeping with minutes launched on Wednesday.

Much less aggressive financial coverage is seen as a bullish signal for tech and different riskier property, which generally outperform in a extra secure charge surroundings.

Nonetheless, some traders are involved that the tech rally has gone too far given the vulnerabilities that stay within the economic system and in authorities. The divided Congress is making a debt ceiling deal troublesome because the Treasury Division’s June 1 deadline approaches. Republican negotiator Rep. Garret Graves of Louisiana informed reporters Friday afternoon within the Capitol that, “We proceed to have main points that we now have not bridged the hole on.”

Treasury Secretary Janet Yellen mentioned afterward Friday that the U.S. will probably have sufficient reserves to push off a possible debt default till June 5.

Alli McCartney, managing director at UBS Non-public Wealth Administration, informed CNBC’s “Squawk on the Road” on Friday that following the latest rebound in tech shares, “it is most likely time to take a few of that off the desk.” She mentioned her group has spent quite a lot of time trying on the enterprise market and the place offers are occurring, and so they’ve observed some clear froth.

“You are both AI otherwise you’re not proper now,” McCartney mentioned. “We actually need to be able to see if we do not get an ideal debt ceiling, if we do not get an ideal touchdown, what does that imply, as a result of at these sorts of ranges we’re undoubtedly pricing within the U.S. hitting the excessive notice on every little thing and that looks as if a really precarious place to be given the dangers on the market.”

WATCH: CNBC’s full interview with UBS’ Alli McCartney