US stocks have finished sharply higher as talks on raising the US debt ceiling progressed while chip stocks surged for a second straight day on optimism about artificial intelligence.

After several rounds of talks, US President Joe Biden and top congressional Republican Kevin McCarthy appeared to be nearing a deal to increase the government's $US31.4 trillion ($A48.1 trillion) debt limit for two years while capping spending on most items, a US official told Reuters.

The Dow Jones Industrial Average ended a five-day losing streak while the Nasdaq Composite Index and S&P 500 closed at their highest levels since August 2022, with the S&P 500 above 4,200 points.

The Philadelphia Semiconductor Index jumped 6.3 per cent, bringing its gain in the past two sessions to more than 13 per cent.

Building on recent euphoria related to AI, Marvell Technology Inc jumped 32 per cent after the chipmaker said it would double its annual revenue related to AI.

Investors were closely watching debt ceiling talks as Biden and McCarthy still seemed at odds over several issues heading into the long weekend, with the US stock market closed on Monday for the Memorial Day holiday.

"All the signs point to a deal getting done and this rally being sustained but if we get through the weekend and we don't have a deal or it falls apart in some way, then we're going to wake up Tuesday morning to some pretty material losses," said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina.

Nvidia Corp's stock climbed 2.5 per cent, adding to its 24 per cent gain on Thursday following its blowout forecast and elevating its stock market value to about $US960 billion, according to Refinitiv.

The S&P 500 climbed 1.30 per cent to end at 4,205.45 points, the Nasdaq gained 2.19 per cent at 12,975.69 points while Dow Jones Industrial Average rose 1.00 per cent to 33,093.34 points.

Of the 11 S&P 500 sector indexes, eight rose, led by information technology, up 2.68 per cent, followed by a 2.38 per cent gain in consumer discretionary.

Volume on US exchanges was relatively light, with 9.8 billion shares traded, compared to an average of 10.5 billion shares over the previous 20 sessions.

For the week, the S&P 500 rose 0.3 per cent, the Dow fell 1.0 per cent and the Nasdaq jumped 2.5 per cent.

Data showed US consumer spending increased more than expected in April and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month.

"We still have inflation, we still have higher interest rates and that will continue to be an overhang for the market until the Federal Reserve goes on the sidelines," said David Sadkin, president at Bel Air Investment Advisors.

Traders expect a 60 per cent chance of a 25-basis-point hike by the Fed in its June policy meet, up from about 40 per cent before the data, according to the CME FedWatch tool.

Ford Motor Co jumped 6.2 per cent after the car maker signed a deal allowing customers to access more than 12,000 Tesla Inc Superchargers in North America in early 2024.

Tesla jumped 4.7 per cent.

Ulta Beauty Inc plummeted 13.4 per cent after the cosmetics retailer cut its annual operating margin forecast.

Paramount Global rallied 5.9 per cent after the media conglomerate's controlling shareholder National Amusements received a $US125 million investment.

Advancing issues outnumbered falling ones within the S&P 500 by a 2.2-to-one ratio.

The S&P 500 posted 17 new highs and 15 new lows; the Nasdaq recorded 77 new highs and 115 new lows.