The stock market’s performance last quarter has set Wall Street expectations for further gains in the second half of the year.

“I think there’s just more to be excited about than there is to be nervous about,” Baird investment strategist Ross Mayfield told Yahoo Finance.

Mayfield pointed to falling oil and gasoline prices as an economic tailwind after the US and Iran suspended fighting, along with resilience in the Nasdaq Composite (^IXIC) and S&P 500 (^GSPC).

The broad-based index just saw its strongest quarter in six years as semiconductor stocks took off, while medium- and small-cap companies have also outperformed.

“There’s a lot working,” Mayfield said. “It’s a bull market driven by earnings and liquidity, and those are the kind of things that can keep this going into the 2nd half of the year, and probably, in my opinion, into 2027 as well.”

Kicking off the third quarter, Wall Street remains bullish on technology, with industry analysts predicting a 21% gain in the S&P 500 over the next 12 months, according to FactSet.

“You have to see, as we go into earnings season in July, the validation and monetization of AI,” Dan Ives, senior equity research analyst at Wedbush Securities, told Yahoo Finance last week.

The AI boom is expected to fuel the broader index, with JPMorgan analysts recently upping their year-end forecast to 7,800 by year-end.

The weaker-than-expected monthly jobs report released on Friday signaled that the labor market does not appear overheated. It eased concerns that the Federal Reserve may hike rates this year to cool inflation and slow the economy.

Despite the bullishness, strategists are warning against piling into high-flying memory and chipmakers that have seen sharp gains in recent months, after the Philadelphia Semiconductor Index (SOX) posted its best quarter on record.

“I would be wary, you know … parabolic charts rarely correct sideways,” Baird’s Mayfield said.

Concerns over heavy spending by some Big Tech players have also raised questions about components of the “Magnificent Seven,” which are traditionally known for strong free cash flow generation.

Investors “are questioning whether the hyperscalers’ massive spending on AI infrastructure will ever pay off,” veteran market strategist Ed Yardeni noted. This group of iconic stocks has underperformed compared to booming semiconductors.

“We are in the middle section of the innings of the AI trade,” Omar Aguilar, Schwab Asset Management CEO and chief investment officer, told Yahoo Finance last week. He emphasized diversification away from Overweight on megacaps.