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Thank the “Magnificent Seven” stocks for the S & P 500 ‘s bounce to record levels in 2024 . Even after a blowout 2023, most of the group hasn’t taken a breather, boosting the broad-based index past a record level set in January 2022 and into an official bull market — even without the help of two critical components. “It’s a bet on secular growth,” said Truist’s Keith Lerner. “This growth story is not just six months. It’s multiyear and there’s visibility that this is likely to continue.” Nvidia has led the pack this month, surging 19%. Meta Platforms follows behind with an 8.3% gain this January, Microsoft has rallied 5.4%, Alphabet is up 4.3% and Amazon has added 2.1%. Only Apple and Tesla have lagged, with losses of 0.6% and 15.1%, respectively. Artificial intelligence tailwinds and ongoing excitement around the sector have pushed many of these names to new highs in recent months, and investors don’t see that uptrend coming to a halt anytime soon, especially as the Federal Reserve’s narrative begins to shift. The central bank is forecasting three rate cuts this year. CEO of 50 Park Investments Adam Sarhan said the Fed’s pivot and a drop in rates should continue fueling bets on the sector since the industry tends to benefit from lower interest rates. “AI stocks … are going bonkers,” he said. “Tech with ‘AI sprinkled on top’ continues to be the earnings driver for both Main Street and Wall Street.” Markets largely agree that the Fed is done with its aggressive hiking campaign, but that doesn’t mean the economy is out of the woods yet. Even if economic growth slows, investors have come to view technology companies as a potential haven for spending, Lerner said, predicting that mega-cap names will continue spending on AI to compete with peers — or risk getting left behind. “People see a secular growth story even with all the different type of cross-currents in the economy, interest rates and markets,” he said. “That’s driving people to tech.” Thank the semiconductor It’s hard to overlook Nvidia and the broader semiconductor industry’s role in the recent rally this month, and its deep roots in AI. In fact, both the AI darling and competitor Advanced Micro Devices hit all-time highs during Thursday’s session on the back of better-than-expected results from supplier Taiwan Semiconductor Manufacturing . Then, both stocks toppled that record with a fresh high in Friday’s session. The move helped the broader PHLX Semiconductor Sector Index attain new heights and seemed to confirm an end to the post-pandemic recession for the industry, wrote Ed Yardeni, president of Yardeni Research. .SOX 1Y mountain PHLX Semiconductor Sector Index touches new highs Ongoing tailwinds could continue to boost demand for graphics processing units underpinning AI and stoke the rally in chip stocks, according to Raymond James analyst Srini Pajjuri. “By historic measures, the rally is entering late innings and valuations appear to be discounting a cyclical recovery to a large extent,” he wrote. “However, strong secular tailwinds from Gen AI could extend the rally well beyond the typical 2-year up-cycles, in our view.” — CNBC’s Michael Bloom contributed reporting.
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