Enthusiasm for artificial intelligence is spreading across the stock market.
Nvidia's (NVDA) earnings release Wednesday night will mark one year since the chipmaker first shocked Wall Street with demand for its AI chips. Since then, mentions of AI in earnings calls have skyrocketed, increasing 186% since the first quarter of 2023, according to Bank of America Research.
This means the conversation around AI has shifted from AI chip makers like Nvidia (NVDA) and AMD (AMD) to AI power users like Alphabet (GOOG, GOOGL), Meta (META), Amazon (AMZN), and Microsoft (MSFT). This is in response to the rapid transition. . More recently, strategists have emphasized expansion into other sectors that could benefit from increased power usage, such as energy (XLE), utilities (XLU), and commodities.
“It's no longer just about NVDA,” Orson Kwon, U.S. and Canadian equity strategist at Bank of America, wrote in a note to clients on Monday.
This change is already underway in the market. Several precious metals, including copper (HG=F), which strategists say will benefit from AI investments, have hit recent highs. The utilities and energy sectors have been two of the best-performing sectors in the S&P 500 (^GSPC) this year, rising approximately 15% and 13%, respectively.
This has spilled over into individual stocks, with Nvidia's meteoric share price rise since early 2024 matched by Texas-based Vistra Corporation (VST), which is up about 140% this year, and Constellation Energy ( CEG) stock is up nearly $90. %, which roughly matches his Nvidia rise this year.
Morgan Stanley Chief Investment Officer Mike Wilson named utilities an overweight sector in a note on Sunday, noting that it brings “upside to the AI power theme.” Wilson said Morgan Stanley's Power & Utilities team is confident that new AI data centers, 50 times larger than before, will increase electricity consumption from 3% of total U.S. consumption in 2023 to about 10% by 2030. He emphasized that he thought it was possible.
“Both traditional and alternative energy providers have upside potential amid rising AI data center power demands and more favorable data center power deals,” Wilson wrote.
Companies are also playing a role in building AI.
According to research from Goldman Sachs' equity strategy team, led by David Kostin, mentions of AI surged in the first quarter: More than 66% of energy companies mentioned AI on their earnings calls this quarter, up from 19.1% in the previous quarter.
Considering the bigger picture implications, investors will likely keep an eye on Nvidia's report on demand for AI chips.
So far, Nvidia has repeatedly surprised investors on this front, consistently beating analysts' expectations in quarterly results and boosting its outlook for next quarter on the back of strong demand for its AI servers.
Whether this trend continues or breaks could have implications for a variety of sectors.
“If the market wakes up and says, 'Maybe we got a little too excited, maybe we brought some of our earnings forward a little bit,' then that will be reflected in valuations,” JPMorgan Asset Management Global Markets said. “I think it could be a bit of a choppy road there,” strategist Jack Manley told Yahoo Finance.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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