The Performance of AI Stocks in the S&P 500 Surpasses Expectations in 2021, Beyond the ‘Magnificent Seven’

The Performance of AI Stocks in the S&P 500 Surpasses Expectations in 2021, Beyond the ‘Magnificent Seven’

The stock-market craze surrounding artificial intelligence (AI) has not only benefited the top seven companies in the S&P 500, but also a total of 67 AI-related stocks in the index. According to Bespoke Investment Group, these stocks have surged by an average of 45.3% since the end of November 2022, when the first iteration of ChatGPT was released to the public. In contrast, the remaining 433 non-AI stocks in the S&P 500 have only seen a 9.2% increase over the same time frame.

One of the key players in the AI sector is Nvidia Corp., a chip maker that has gained significantly from investor enthusiasm around AI. With a market value of approximately $1.8 trillion, Nvidia is among the top weights in the S&P 500. The company is scheduled to report its fourth-quarter earnings results after the U.S. stock market’s close on Wednesday. Bespoke Investment Group noted that AI stocks continue to capture most of the investment world’s attention. So far this year, the average S&P 500 AI stock has risen by 3.7%, compared to a gain of 1.1% for non-AI stocks.

Despite a slight drop of around 6% on Tuesday afternoon, shares of Nvidia have surged more than 37% this year. In fact, the S&P 500’s technology sector, which includes Nvidia, has seen a gain of over 5% so far in 2024 as of Tuesday afternoon’s trading. Additionally, the Roundhill Magnificent Seven ETF, which holds megacap stocks like Microsoft Corp., Apple Inc., Nvidia, Amazon.com Inc., Meta Platforms Inc., Alphabet Inc., and Tesla Inc., has climbed almost 8% year-to-date.

Notably, five of the “Magnificent Seven” stocks have shown gains this year, with Nvidia leading the way. Only Apple and Tesla are in the red so far in 2024. Beyond the Magnificent Seven, there are several other large-cap AI stocks that are widely followed. These include companies like Advanced Micro Devices Inc., ServiceNow Inc., Broadcom Inc., Intuitive Surgical Inc., Salesforce Inc., and Intel Corp. While Intel is down this year, the remaining six have posted gains exceeding those of the S&P 500.

However, on Friday, the 67 AI-related stocks in the S&P 500 experienced a minor setback, falling by an average of 1.3%. In comparison, the non-AI stocks slipped by just 0.3%. Overall, U.S. stocks were declining on Tuesday, following the three-day weekend honoring Presidents Day on Monday.

The recent performance of AI stocks in the S&P 500 has sparked discussions about the sustainability of the AI “baby bubble” in stocks. Some experts argue that higher interest rates may be necessary to prevent a potential burst. Bank of America suggests that the current hype surrounding AI stocks may require a correction to ensure a healthier market environment.

In conclusion, AI stocks in the S&P 500 have surpassed expectations in 2021, with 67 AI-related stocks experiencing significant gains. Nvidia Corp., among other AI companies, has benefited greatly from investor enthusiasm around AI. While the sector experienced a minor setback recently, the overall performance remains strong. As AI continues to shape various industries, it will be interesting to see how these stocks perform in the future and whether they can sustain their growth.