Topline
An over $4 trillion big tech resurgence for the biggest technology companies drove the stock market’s strong first half of 2023, as investors pour boundless optimism into the artificial intelligence wave, leading to some questions of whether the broader gains will stick.
Key Facts
Nvidia is by far the top-performing member of the S&P 500 this year, according to FactSet data, as the leading AI chipmaker’s stock spiked 190% in the first half and hit an all-time high in May; fellow chipmakers Palo Alto Networks (up 83%) and Advanced Micro Devices (76%) are the sixth and eighth-best performers on the index.
Nvidia also headlines the broader rally for mega-cap tech, as the six other largest American tech companies—Apple (up 50%), Microsoft (43%), Alphabet (36%), Amazon (55%), Tesla (113%) and Meta (138%)—are each among the 50 top returners on the S&P, collectively tacking on $4.1 trillion in market capitalization.
Also in the top five are a pair of perhaps surprising names—cruise lines Royal Caribbean (up 111%) and Carnival (133%)—both of which smashed on first quarter revenue expectations yet still sit well below their pre-pandemic share prices.
Ambrx Biopharma (up 625%) is the best-performing small-cap stock included on the Russell 3000, Carvana (452%) is the top mid-cap pick, Super Micro Computer (206%) is the top large cap name and Nvidia tops the mega-cap list.
Salesforce (up 59%) is the biggest gainer listed on the Dow Jones Industrial Average, while Ambrx is the tech-heavy Nasdaq’s big winner.
Key Background
Year to date, the S&P, Dow and Nasdaq are up 16%, 4% and 33%, respectively, rebounding from the stock market’s dreadful 2022, which saw the worst returns in 13 years. Information technology (think Apple and Oracle), communication services (Comcast and Netflix) and consumer discretionary (Amazon and Starbucks) are the S&P’s top-performing sectors this year, bucking last year when the trio were the index’s biggest laggards.
Crucial Quote
“AI is the new electricity” and “is about to revolutionize everything,” Bank of America strategists wrote this spring, likening it to the internet-fueled tech boom during the 1990s.
Contra
Despite the market’s headline gains, it’s been far from a banner year for all firms. The median stock listed on the S&P has returned 5%, meaning a few surging names are leading the overall rally. In fact, the weight of the S&P’s two largest components, Apple and Microsoft, is at its highest level in four decades.
Chief Critic
In a note to clients last month, Morgan Stanley chief strategist Michael Wilson said he views “AI as mostly a cost in 2023 that will pressure margins further as [profit] disappoints,” explaining AI-driven growth hopes have little effect on most corporate earnings in the near term.
Tangent
It’s been a painful year for investors long on energy, utilities, healthcare and financial services, with each sector down 2% or more through Friday.
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Bigger Than Amazon? Nvidia Stock Surges After ‘Cosmological’ Profit Projections (Forbes)
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