Tech stocks continue to rally as the artificial intelligence (AI) race creates continued buzz.
- Citigroup Inc.’s quantitative strategists are reporting that investment growth has increased 20% in this, thanks in part to AI interest, Bloomberg reports.
- Nvidia Corp’s recent rally to a $1 trillion market cap similarly drove other tech stocks.
- The Federal Reserve’s expected decision to pause interest rate hikes has also cooled market fears.
- The researchers noted the Nasdaq 100’s current rally in the past six months has raised the 12-month forward prices-to-earnings ratio to 25.7 times, higher than the 20.7 average of the prior decade.
- With recession fears and a shaky future looming, it remains to be seen how long this rally will continue.
Why It’s Important
As we previously reported, AI has pushed tech companies like Google, Microsoft, and Apple into a race to develop the first widely applicable and useful solutions. AI is already being integrated into customer service features, search engine optimization, and cloud computing. The stock market rallied last month over newly announced AI enhancements for Amazon and Nvidia, joining brands like Tesla, Meta, and Alphabet in their recent tech rally and raising their collective market cap.
Nvidia in particular has been soaring to new heights as its recent sales announcements well exceed expectations, with popular investors like ARK Invest CEO Cathie Wood being taken somewhat off their guard by the sudden valuation spike of the company and having to defend their missing out on it.
“We remain positive on Growth for June as we see more tailwinds than headwinds manifesting for this Style over the next month,” says the Citigroup team. “Growth is likely to rebound further should investor sentiment improve further. On the extreme opposite, growth may provide more downside protection in a recessionary environment since macro risk in growth is low.”