Investors are sending two leaders of the artificial-intelligence trade in opposite directions.

Alphabet took another step toward $4 trillion in market value on Tuesday, rising more than 1% to extend a monthslong rally fueled by enthusiasm for the Google parent's AI tools, cloud computing and chip business. Nvidia shares slid 2.6%, dragging the world's biggest company by market size further below a $5 trillion valuation reached just weeks ago.

Tuesday's divergence followed news that Meta Platforms is in talks to spend billions of dollars on Google's AI chips, one of the few alternatives to Nvidia's. But that was just the latest in a split between the two index heavyweights that this month has driven Alphabet 15% higher and Nvidia 12% lower.

Worries about the AI trade that buffeted markets recently have weighed particularly heavily on Nvidia, a bellwether of investors' enthusiasm for big tech. At the same time, Alphabet has defied the trend, with investors rewarding the company for both its AI advances and its strong core advertising and search businesses.

Alphabet shares climbed as high as 3.2% in early trading after The Information reported the talks with Meta about using Google chips to run its data centers. Alphabet last year ramped up production of semiconductors, an effort that potentially reduces reliance on outside vendors.

Tuesday's news hit a sensitive spot for investors already uneasy about circular financing, runaway spending and growing competition in AI. A hyperscaler such as Google pushing into Nvidia's territory "tapped into a fear that was already there," said Dan Morgan, a senior portfolio manager at Synovus Trust.

"Google does have pretty big muscles," he said. "They're not some little guy on the fence."

The potential deal adds to a string of recent events that have lifted Alphabet shares to records, including a court victory that quelled fears of a government breakup, an investment from Warren Buffett's Berkshire Hathaway and a positive reception to its new Gemini 3 model.

Nvidia, in turn, was among Tuesday's biggest decliners, along with some other AI-related stocks. Advanced Micro Devices lost 4%. Super Micro Computer fell 2.5%. Oracle declined 1.6%.

Investors plowed money into almost everything else. Eight of the S&P 500's 11 sectors advanced, led by a 2.2% gain in healthcare stocks. The Dow Jones Industrial Average rose 664 points, or 1.4%, to notch its best day since August. Merck rose 5.2%. Home Depot added 4.3%. The S&P 500 rose 0.9%, while the tech-heavy Nasdaq trailed other indexes, moving just 0.7% higher.

More broadly, optimism that the Federal Reserve will cut interest rates next month, a potential peace deal in Ukraine and easing tariffs have boosted stocks, said Gorr Sahakian, chief investment officer of the Hovnanian family office.

"It seems like the Trump Administration is trying to do whatever they can to handle prices," he said. "There's some encouragement there but we'll see if it works."

But trouble in the AI trade remains at the forefront of investors' concerns. Nvidia is still up 32% this year, but shares have borne the brunt of the recent fears that the wave of spending on AI infrastructure won't translate into profits in coming years.

Doubters include Michael Burry, the investor profiled in Michael Lewis's "The Big Short," who made a fortune betting against subprime mortgages nearly two decades ago and who disclosed a new bet against Nvidia in the third quarter. Burry also started writing about parallels between today's AI frenzy and the excesses of the dot-com bubble on social media and in a new Substack newsletter.

In an unusual move, Nvidia responded to Burry's and others' criticisms of the company in a seven-page document circulated among stock analysts over the weekend, according to analysts and a copy of the report viewed by The Wall Street Journal.

If Nvidia was trying to allay investor concerns, the move backfired, according to Gil Luria, an analyst at D.A. Davidson. "The memo itself makes Nvidia seem defensive, and not sharing it publicly has made it appear even worse. We agree with many of the answers they have provided, but a company this big does not need to address every question that is raised between quarterly reports," Luria said.

Meanwhile, several retailers reported earnings that beat Wall Street's expectations. The S&P Retail Select Index gained 4.6% Tuesday after electronics seller Best Buy reported better-than-expected earnings ahead of Black Friday. Kohl's also posted a surprise profit and Dick's Sporting Goods boosted its outlook.

Still, less than a quarter of consumers plan to spend more on holiday shopping than they did last year, according to a report by JD Power. "The middle of the income distribution remains very uncertain as we approach the holiday season," said Eric Teal, chief investment officer for Comerica Wealth Management.