The S&P 500 (^GSPC) set a new record on Tuesday, closing above the 6,400 mark for the first time. This milestone signals a significant moment in the ongoing bull market that began in October 2022.
Tech giants have been the backbone of this rally; Meta (META) and Palantir (PLTR) both gained over 2% on Tuesday, marking their records as key players in the surge.
After experiencing a 0.3% rise in premarket trading, Meta’s momentum continued on Wednesday, while Palantir also saw a 1% increase.
According to Jessica Rabe, co-founder of DataTrek Research, the investor sentiment is shifting back to confidence in large-cap tech stocks. In her research note, she emphasized that the early stages of this move still have room for growth.
What’s striking is that the top 20 stocks by market capitalization in the S&P 500 have surged an average of 40.6% since the market’s low point, significantly outpacing the S&P 500’s total gain of 27.9%. This suggests that these leading companies have played a crucial role in boosting the index, even as many of the other 480 stocks have underperformed.
Many of the outperforming stocks, such as Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL, GOOG), and others, are connected to stories of AI growth.
Rabe noted, “Companies harnessing groundbreaking innovations like generative AI are noticeably driving returns in the US equity markets.”
As we analyze the market bounce back, it seems like there’s an AI-focused trend emerging. So far, it’s only the Information Technology (XLK) and Industrials (XLI) sectors that have led the way since the market hit its low.
Citi’s US equity strategist Scott Chronert pointed out that the rise in the Industrials is glimpsing at a broader expansion of the AI movement, with these companies capitalizing on the increased spending in the AI realm.
Chronert observed, “The influence of AI is reaching beyond tech stocks and across the index. This broader effect is quite apparent.” He considers the long-term prospects currently lie in scouting companies that will eventually see improved margins and productivity through AI integration into their operations.
He further asserted, “We are likely in the beginning phases of building AI infrastructure. A more extensive incorporation of AI across companies will play a pivotal role in tracking production metrics and profitability in strategic planning moving forward.”
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
