The AI trade is propelling stocks to new heights -- and it is dragging the rest of the market along for the ride.

The S&P 500 and Nasdaq composite blew past new closing records on Tuesday, the latest leg of a rally that has powered through everything in its path, from the Federal Reserve's decision to raise rates for the first time in three years to a monthslong war that lifted oil prices to $100 a barrel.

Increasingly, the market is running on one engine: a familiar cast of tech companies that are building out (and benefiting from) the AI revolution. Nvidia, whose grip as the dominant supplier of chips that power AI has made it the world's most-valuable company, has jumped 4.5% in the past week to a new all-time high. Meta Platforms is up 24% since Aug. 13, when the S&P 500 had its previous high.

Just about everything else is going down. Shares of healthcare firms, banks and consumer staple companies are declining. So are small-cap stocks. And blue chips, like the Dow industrials.

The yawning gap between the market's biggest winners and other stocks is growing larger. Less than half of the stocks in the S&P 500 closed above their 200-day moving average on Tuesday, Dow Jones Market Data shows, a figure that has steadily declined since August.

The AI powerhouses have grown so vast, and the momentum behind AI's build-out so relentless, that many investors now see these stocks as immune to the effects of higher interest rates, analysts said. The hope is that eye-watering earnings forecasts will keep propelling tech names forward, even with higher rates and a cooling economy bearing down on the rest of the market.

"People look around and say 'Which areas of the market can weather this?'" said Keith Lerner, chief investment adviser for Truist Advisory Services. "Tech is almost seen as defensive in some ways."

Big tech companies -- particularly AI "hyperscalers" including Alphabet, Amazon, Microsoft and Meta -- have been traditionally known as cash-rich and relatively debt-free companies that can keep growing even when borrowing costs rise.

Many of those companies are now raising tens of billions of dollars to finance the AI build-out, but their rising debt loads haven't yet given investors a reason to look elsewhere. Compared with other companies, they are still more likely to grow through higher rates, said Dan Russo, chief investment officer at Potomac Fund Management.

"Higher interest rates and inflation are taking a toll on other stocks in the S&P 500," Russo said. "It's only the fortresslike balance sheets at the large-cap end of the spectrum that are propping the market up."

The combined market cap of the Magnificent Seven, which includes the four hyperscalers plus Tesla, Nvidia and Apple, closed at a record high on Tuesday of roughly $25 trillion.

The tech-stock performance is one key reason why indexes have continued their rise even in the midst of a global bond selloff that has driven Treasury yields to their highest level in two decades. Bond yields retreated from their highs on Tuesday, declining 0.040 percentage point to settle at 5.270%.

Meanwhile, the threat of higher rates and rising costs is dragging on share prices for all kinds of businesses. The Russell 2000, which gauges the performance of small-cap companies, is trailing behind the S&P 500 over the past month. So are the blue chips in the Dow Jones Industrial Average -- and even the equal-weighted version of the S&P 500 itself.

Analysts say the market's so-called narrow breadth could pose a risk to investors, with equity market returns solely reliant on a small group of stocks that can swing wildly on a variety of concerns, from outsize spending and declining free cash flow to external threats like Chinese AI models or even a kind of superintelligence doomsday.

Others note the market has been more or less reliant on tech's success for several years now, with ultimately good results.

Lerner has described investors' view of the sector as "a love-hate relationship." At the same time, he said, they are not selling their tech stocks.

"All roads lead back to tech at this point," Lerner said.