Stocks Hit Records. Dell Raised the AI Bar.

GOOD MORNING, Thursday gave markets a rare combination: geopolitical relief, record highs and a fresh AI earnings shock. The S&P 500 and Nasdaq closed at records after reports that the U.S. and Iran had reached a draft agreement to extend their ceasefire for 60 days. Then Dell raised its full-year outlook after the bell as AI-server demand surged. The problem is underneath the rally. April PCE inflation hit 3.8%, its highest in three years, while first-quarter GDP was revised down to 1.6%. AI earnings are still accelerating. The macro backdrop is starting to look more like stagflation.

MARKETS | TLDR

The S&P 500 and Nasdaq closed at record highs: The S&P 500 gained 0.58% to 7,563.63, the Nasdaq rose 0.91% to 26,917.47 and the Dow edged up 0.05% after reports of a draft U.S.-Iran ceasefire extension.
Inflation accelerated while growth was revised lower: April PCE inflation rose 3.8% year over year, while first-quarter GDP growth was revised down to a 1.6% annualized pace from 2.0%.
Dell surged after hours on AI-server demand: Dell raised annual revenue guidance to $165 billion–$169 billion and lifted its fiscal 2027 AI-server revenue forecast to roughly $60 billion.

DELL

Dell Just Raised the AI Infrastructure Bar Again

Dell raised its full-year revenue forecast to $165 billion–$169 billion from $138 billion–$142 billion and lifted adjusted EPS guidance to $17.90 from $12.90. First-quarter revenue jumped 88% to $43.84 billion, while adjusted earnings of $4.86 a share easily beat expectations.

The bigger signal is AI infrastructure. Dell now expects roughly $60 billion of AI-server revenue for fiscal 2027, up from a prior forecast of $50 billion. Its infrastructure solutions group, which includes servers, storage and software, grew 181% in the quarter. U.S. hyperscalers are expected to spend more than $700 billion on AI infrastructure this year, and Dell is converting that capex directly into revenue.

There is still a cost side to the boom. Dell COO Jeff Clarke said the company is repricing products constantly because memory shortages and inflation are pushing input costs higher. That is an important read-through: AI demand is strong enough to support higher prices, but the same capital cycle is also contributing to shortages and inflation across the hardware stack.

MACRO

Record Stocks Are Trading Through a Stagflation Signal

April PCE inflation rose 0.4% month over month and 3.8% from a year earlier, the fastest annual increase since May 2023. Core PCE rose 3.3% year over year. At the same time, first-quarter GDP growth was revised down to a 1.6% annualized pace from 2.0%, reflecting weaker consumer spending and inventory investment.

The combination is uncomfortable for the Fed. Slower growth normally argues for easier policy, while inflation near 4% argues for restraint or even renewed tightening. Several strategists described the mix as a stagflation problem — especially because energy prices from the Iran conflict and heavy AI investment are both adding to inflation pressure.

Markets looked through it Thursday because the inflation numbers were broadly in line with expectations and ceasefire headlines reduced the immediate oil risk. But the policy constraint remains. Record equity prices can coexist with weak growth if earnings keep rising. They become much harder to justify if inflation keeps the discount rate elevated at the same time.

HEADLINES

Snowflake surged 36% after raising its outlook: The data-cloud company also announced a five-year AI infrastructure agreement worth $6 billion with Amazon Web Services, another sign that AI spending is spreading beyond chips into software and cloud platforms.
Microsoft gained 3.5%: Reports that the company plans to release a new coding model helped reinforce Thursday’s broader AI risk appetite.
Dollar Tree jumped almost 18%: The retailer lifted its annual profit forecast, a counter-signal that some consumer businesses can still protect margins despite higher prices.
Best Buy rose 15.8%: Better-than-expected sales guidance showed pockets of consumer demand holding up even as aggregate GDP growth slowed.
The U.S.-Iran agreement was still only a draft: The proposed 60-day ceasefire extension still required President Trump’s approval, while Iranian media said the memorandum had not yet been finalized or confirmed.

UPCOMING

U.S.-Iran deal decision — May 29: Markets will watch whether the draft ceasefire turns into a binding agreement and whether Hormuz shipping restrictions begin to ease.
ISM manufacturing — June 1: Manufacturing activity will be an early test of whether the softer GDP print is spreading into the second quarter.
JOLTS job openings — June 2: Labor-demand data will help determine whether the economy is slowing enough to reduce Fed tightening pressure.
U.S. payrolls — June 5: The jobs report will be the next major test of the stagflation narrative — strong hiring could keep the Fed restrictive, while weaker hiring would deepen growth concerns.

DEEP INSIGTHS

Inflation Rises While GDP Slips

Read this for the day’s central macro tension. PCE inflation at 3.8% and GDP growth at 1.6% leave the Fed with less room to respond in either direction. The market can look through that tension while earnings are strong, but it raises the hurdle for valuations if growth softens further.

Trading Day: Stocks Sizzle on Ceasefire Extension

This is the cleanest cross-asset frame for Thursday. Record stocks, falling yields and geopolitical relief masked a deeper debate over stagflation and whether AI capex is being brought forward too aggressively. That tension — powerful earnings now versus questions about returns later — is becoming central to the market.