STORY: The S&P 500 and Nasdaq again notched record closes on Tuesday as Nvidia surged to new heights, overtaking Microsoft to become the world's most valuable company.

The Dow ticked up marginally, the S&P 500 gained a quarter-percent, while the Nasdaq just barely eked out a gain, but still notched its seventh straight record close.

Shares of Nvidia gained 3.5%, lifting its market capitalization to $3.22 trillion, higher than both Microsoft's and Apple's.

"It's a bit surprising."

Melissa Brown, managing director of applied research at SimCorp, wonders if the AI chip leader's stunning surge is sustainable.

"They certainly are in a business that should have substantial growth, and obviously investors are already accounting for that. What my concern would be is how long the growth can be sustained and are the valuations kind of reasonable enough that we wouldn't have to have huge growth or very prolonged growth to really be able to justify buying the stock."

Other chip stocks extended their recent rallies as well, boosting the Philadelphia Semiconductor index to a record high.

Qualcomm gained more than 2%, Arm Holdings climbed more than 8.5% and Micron Technology added more than 3.5%, hitting a record high.

Those gains offset losses in Alphabet and Meta Platforms, which both fell more than a percent.

Economic data on Tuesday showed retail sales rose less than expected in May, while another report showed surprisingly strong industrial production and manufacturing output.

Markets slightly increased bets on two Federal Reserve interest rate cuts this year, according to LSEG's FedWatch, despite policymakers just last week projecting only one.