The AI Surge: Here’s Why Wall Street Is Putting Its Money on S&P 500
Let’s talk artificial intelligence (AI). It’s been on everyone’s lips for a while now, but recently, it’s been making some serious waves on Wall Street. The S&P 500 is seeing a surge of interest, and a lot of it is down to the AI boom that we’ve been hearing so much about. So, let’s dive in and see what’s up.
The AI Boom and Wall Street’s Bullish Stance
With tech giants like Microsoft and Alphabet making use of AI in everything from product recommendations to ad campaigns, it’s no surprise that Wall Street is getting a little giddy. Bank of America and RBC Capital Markets are already upping their year-end targets for the S&P 500, and Goldman Sachs is calling the index undervalued, while citing AI as a key factor.
But the real showstopper is Capital Economics. They’ve just bumped their 2025 price target for the S&P 500 to a whopping 6,500. That’s a 46% upside over the next 18 months, and it’s all thanks to the growing demand for AI.
Making The Most of the AI Wave: Investing in S&P 500 Index Fund
So, how does one profit from this AI-tinted gold rush? Well, one smart move would be to invest in an S&P 500 index fund. The Vanguard S&P 500 ETF tracks the performance of hundreds of American businesses – a good chunk of which are using AI in some capacity.
AI and The Big Five in the S&P 500
Microsoft, for example, is leaning on AI across its portfolio, from text generation in Word to detecting cyberattacks with Microsoft Defender. It’s also buddying up with OpenAI, which is a win-win situation for Microsoft. They get to monetize anything OpenAI develops, and they get direct access to OpenAI’s models for their developers.
Alphabet, the ad tech titan, is using AI to make Google Search results more relevant and YouTube content recommendations more personal. Not to mention, AI is significantly boosting its cloud computing business.
Amazon is using AI to forecast retail sales, optimize supply chains, and even streamline logistics with robots and drones. And let’s not forget Nvidia – the AI infrastructural powerhouse that offers a full AI compute platform.
And then there’s Tesla, ahead of the pack in the race to build a fully autonomous vehicle, armed with more autopilot-enabled cars on the road than any other automaker and the most efficient in-car supercomputer in the world.
The S&P 500’s Track Record: A Solid Bet for Patient Investors
While Wall Street is betting on AI stocks to drive the S&P 500 higher, the index itself has a proven track record of positive return over every rolling 20-year period since its inception. In other words, the S&P 500 has consistently been a reliable moneymaker, and there’s no reason to believe that’s going to change anytime soon.
So, there it is. The AI boom is here, and it’s sending ripples across Wall Street and beyond. Get your surfboards ready, folks.
Source: themotleyfool
