AI Powers Tech Stocks to Best Start Since ’83
The Nasdaq Composite, home to over 2,500 companies and heavily skewed toward tech, has seen a remarkable surge in the first half of 2023, outperforming any other year since 1983. As reported by the Financial Times, the index skyrocketed by 32%, marking its strongest start in four decades. The driving force behind this unprecedented growth? Artificial intelligence (AI).
The Rise of AI in Tech Stocks
AI has been a game-changer for technology stocks, propelling them to new heights. It all began with the explosion of interest in ChatGPT, which ignited investor enthusiasm and sparked a wave of investments in Big Tech. Chipmaker Nvidia, electric-vehicle manufacturer Tesla, and social-media giant Meta Platforms emerged as frontrunners in the AI revolution. These three companies, along with Apple, Microsoft, Google parent Alphabet, and Amazon, form a group of high-flying tech stocks known as “The Magnificent Seven.”
Impressive Gains and Potential Correction
The performance of these tech giants has been nothing short of impressive. In the first half of 2023 alone, they secured triple-digit gains, solidifying their status as the winners of the AI craze. However, some analysts are skeptical about the sustainability of this extraordinary run. They caution investors to consider taking profits now, anticipating a potential correction in AI stock valuations during the second half of the year.
UBS Global Wealth Management equity strategist Sundeep Gantori, in a recent research note, emphasized the importance of selective investing in AI-related stocks. While not considering the AI trend a bubble, Gantori advises investors to approach the market cautiously, given the significant rally so far this year.
Factors Boosting Tech Stocks
Additionally, the Federal Reserve’s decision to ease up on its monetary-tightening campaign has provided a favorable environment for tech stocks. As interest rates stabilize and returns from traditional investment avenues plateau, investors have turned to stocks as an attractive alternative. This shift in investment preferences has further bolstered the performance of tech stocks in the first half of 2023.
The Road Ahead
As the year progresses, all eyes will be on the Nasdaq Composite and the fate of AI-related stocks. Will the AI revolution continue to fuel their growth, or will the market experience a correction? Only time will tell.
