US STOCKS-S&P 500 ends higher as AI optimism lifts chip stocks

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Semis rise as TSMC bullish on AI demand

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Apple rises on BofA rating upgrade

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US weekly jobless claims fall to level last seen in Sept 2022

(Recasts with end of trading session, adds market details)

By Noel Randewich and Ankika Biswas

Jan 18 (Reuters) - U.S. stocks ended higher on Thursday, as AI optimism drove gains in Nvidia and other chip stocks, while doubts about interest rate cuts hit utilities and real-estate shares.

U.S.-listed shares of Taiwan Semiconductor Manufacturing (TSMC) soared after the world's largest contract semiconductor maker projected 2024 revenue growth of more than 20% on booming demand for high-end chips used in artificial-intelligence applications.

Heavyweight chipmaker Nvidia hit an intraday record high, and it was the most-traded company on Wall Street, with over $24 billion worth of shares exchanged. Rival Advanced Micro Devices also notched a record high.

Broadcom, Qualcomm and Marvell Technology gained. The Philadelphia SE semiconductor index rallied and approached its December 2023 record high.

Apple jumped after BofA Global Research upgraded the iPhone maker's stock to "buy" from "neutral." That helped the S&P 500 information technology index reach a record high.

According to preliminary data, the S&P 500 gained 41.32 points, or 0.87%, to end at 4,780.53 points, while the Nasdaq Composite gained 200.19 points, or 1.35%, to 15,055.81. The Dow Jones Industrial Average rose 202.00 points, or 0.54%, to 37,468.67.

Data showed the number of Americans filing new claims for unemployment benefits fell last week to a late-2022 low, suggesting solid job growth in January.

Jake Dollarhide, CEO of Longbow Asset Management, said he has recently been more conservative with his clients' money as investors become less sure the Federal Reserve will begin cutting interest rates in March.

The S&P 500 lost ground on Tuesday and Wednesday following strong December retail sales data and after policymakers talked down expectations for an early start to rate cuts.

"People are starting to say, 'Hey, we've made the assumption the Fed is going to start cutting in March, but will they, and what does it look like if they don't?'" Dollarhide said.

Traders now see a 56% chance for a 25-basis-point rate cut in March, compared with a chance above 80% a month ago, according to the CME Group's FedWatch Tool.

Interest rate-sensitive sectors dipped, with the S&P 500 real estate index and utilities index among the deepest sector decliners.

Atlanta Federal Reserve President Raphael Bostic said he was open to reducing rates sooner than he had anticipated if there is "convincing" evidence in coming months that inflation is falling faster than he expected. Bostic had previously said he expected it would be appropriate to cut rates in the second half of 2024.

Humana dropped after the health insurer forecast fourth-quarter medical costs to be higher than previously expected. Peer UnitedHealth also fell.

KeyCorp dropped after the lender posted a decline in fourth-quarter profit, while Birkenstock sank almost 9% after missing quarterly profit expectations.

Spirit Airlines tumbled after Citigroup downgraded the stock to "sell" from "neutral." (Reporting by Noel Randewich in Oakland, California Additional reporting by Johann M Cherian and Ankika Biswas in Bengaluru Editing by Shounak Dasgupta and Matthew Lewis)