The S&P 500 (^GSPC) closed Tuesday with its 36th gain of 2024. The tech-heavy index gets about 30% of its value from the Magnificent Seven group of tech stocks, with most of its gains coming from the AI sector. The frenzy shows no signs of abating, according to a report from BlackRock.
Ines Ferre, senior business reporter at Yahoo Finance, joins Catalysts to analyze the report and explain what investors can expect from the AI hype going forward as the market continues to rise.
To learn more about expert insights and the latest market trends, click here to watch this full episode of Catalysts.
This post Nicholas Jacobino
Video Transcript
The S&P 500 closed at its 36th highest price of the year on Tuesday and is on an upward trend today.
The hype around AI is a big driver of stock price growth.
The BlackRock report said that this situation is not expected to change significantly anytime soon.
Now we have ourselves joining in on this.
For A, Madison and BlackRock strategists compare AI-related transformation, the energy transition and supply chain restructuring to the Industrial Revolution.
That's because there's huge capital expenditure being undertaken in this space, with investment in AI data centers, for example, predicted to grow 60-100% annually over the next few years.
So, what does this mean for investing?
Strategists expect the AI theme to continue to drive earnings, some of which will expand beyond tech, but for now investors are leaning to stay on the sidelines with $6.15 trillion in money market funds.
These strategists say the best returns will come from offloading cash and leaning into risk.
You have to be very selective, your fundamentals are key, and you have to find your strengths.
One thing investors want is an expansion of the market, and Nvidia and Big Tech have played a big role.
Now, these strategists say, the scope of AI and its beneficiaries is expanding.
For example, energy utilities, industrial healthcare, etc. are some of the sectors that will benefit from AI through their construction or adoption.
For example, utilities, we've talked to you a lot about them, and the utilities ETF is up over 8% year to date last year.
It fell 7%.
A lot of it has to do with powering AI data centers, electrifying America.
And that doesn't just mean data centers, but also chip factories and restoring supply chains to the United States.
So expanding means expanding into other areas that would benefit from adopting and building AI.
