What’s News in Markets: Bubble Fears, AI Slop, Toilet Stocks

This week's WSJ What's News in Markets episode covers a broad AI-driven rally in stocks, with the NASDAQ and S&P 500 hitting records amid strong tech earnings. While bubble comparisons to 1999 echo louder, investors emphasized profits and growth, rotating into software, cybersecurity, and even infrastructure plays like ceramics suppliers.

Index Gains and Tech Leadership

The NASDAQ rose 4.5% for the week, leading major indices to new highs, followed by the S&P 500 up 2.3% and the Dow up 0.2%. Tech stocks dominated, surging 7%—the S&P 500's best sector by far. Gains spread beyond the "Magnificent Seven," with companies like Uber and Pinterest beating earnings expectations. Software stocks rebounded after prior AI-disruption fears, as investors bet on their role in the AI buildout.

AI Infrastructure and Cybersecurity Winners

Datadog shares soared 42%, the top S&P 500 performer, after stronger-than-expected revenue. Customers increasingly use its tools to monitor AI infrastructure, validating demand. Cybersecurity firm Fortinet jumped 32% on similar earnings, tied to rising AI-related needs. These moves signal investors' appetite for established players enabling AI operations, countering earlier concerns that AI would obsolete traditional software.