NEW YORK: The Nasdaq reached a record high close on Thursday for the first time in over two years, its latest rally propelled by investor optimism about artificial intelligence that has fueled surges in Nvidia and other heavyweight tech stocks.

The Nasdaq advanced 144.18 points, or 0.90%, to 16,091.92, beating its Nov. 19, 2021 record high close of 16,057.44.

"The anticipation of an artificial intelligence boom has really provided support for these stocks even at extended valuations," said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey. "For it to continue I think you'd to need move past the idea of artificial intelligence as a revolution and begin to see revenue growth directly attributable to it."

Nvidia - which has replaced Tesla as Wall Street's most widely traded company - has been the poster child of the market's surging interest in artificial intelligence.

The Santa Clara, California-based company controls about 80% of the high-end AI chip market, with customers including ChatGPT creator OpenAI, Microsoft, Alphabet and Meta Platforms snapping up tight supplies of its components to compete in the fast-emerging generative AI sector.

The tech-heavy index began its latest rally after its closing low in December 2022, which was down more than 30% from its November 2021 record high as investors worried about inflation and rising interest rates dumped growth stocks with high valuations.

The Nasdaq is the last of Wall Street's three major stock indexes to reach a record high close. After selloffs through most of 2022, the S&P 500 has now hit a string of record highs since late January, and the Dow Jones Industrial Average returned to record highs in late 2023.

Much of the Nasdaq's recovery in recent months has been fueled by optimism the Federal Reserve will soon begin cutting interest rates along with the AI-related tech euphoria.

Nvidia has surged 60% so far this year and this month eclipsed Amazon and Alphabet to become Wall Street's third most valuable company, with a market capitalization of $1.94 trillion.

Microsoft, another major AI winner, has gained 10% in valuation to $3.03 trillion in 2024, replacing Apple as the world's most valuable company.

Nvidia rose 1.9% on Thursday. A week ago, Nvidia added $277 billion in stock market value in just one session, a Wall Street record, after it forecast a roughly threefold surge in quarterly revenue and added more kindling to the AI rally.

The S&P 500 technology sector's December-quarter earnings have grown 7.6%, year over year, better than the 6.2% expansion projected at the start of 2024, helped by Nvidia and other AI-related companies, according to LSEG data.

The Nasdaq and S&P 500 are both up about 7% in 2024.

Nvidia has recently become Wall Street's most traded stock by value, day to day. On Thursday, investors exchanged $40 billion worth of its stock, almost twice as much as Tesla, Wall Street's second most traded company, with $25 billion worth of shares exchanged.

Options on Nvidia accounted for 25 cents of every dollar of premium - the price of contracts - traded in U.S. single-stock options over the past month.

(Reporting by Caroline Valetkevitch in New York and Noel Randewich in Oakland, Calif.; Editing by David Gregorio and Christopher Cushing)