Yahoo FinanceBlackRock, BNP See Plenty of AI Fuel Left to Drive Equity Rally

(Bloomberg) -- The artificial intelligence frenzy is nowhere near finished driving global equities to record highs, according to money managers interviewed by Bloomberg News.
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Investors and market strategists at major firms including BlackRock Inc. and BNP Paribas Asset Management said they expect all things AI to feature among the prominent themes in the second half of the year.
While most expect mega-caps such as Nvidia Corp. to remain at the forefront, some others see secondary and tertiary benefactors of AI including utilities and infrastructure providers to take the lead. What’s unanimous is that no one expects the AI buzz to fade.
“We expect AI to be a key theme for the second half,” said Wei Li, global chief investment strategist at the BlackRock Investment Institute. “It’s been a concentrated rally and that’s a feature of the AI transformation rather than a bug in the market. Concentration by itself is not a reason for us to be concerned.”
The S&P 500 Index has surged over 40% since the end of 2022, with the tech behemoths — predominantly winners of the AI theme — driving more than 60% of the advance. Although for some market forecasters the meteoric rally has evoked memories of the dot-com bubble, most say it’s been backed by a robust profit outlook.
A resilient global economy coupled with wagers on lower interest rates from the world’s biggest central banks is also boosting sentiment. However, a contentious US presidential election looming in November threatens to derail the rally.
For now, investors are betting that firms at the helm of AI are likely to keep surpassing already-high expectations around earnings and market share. They predict sectors including materials, energy and industrials will also benefit.
“Nvidia is the company that wins in this space, basically no matter what,” said Saira Malik, chief investment officer at Nuveen Asset Management LLC, which has $1.3 trillion in assets. Her fund counts Nvidia, Apple Inc. and Amazon.com Inc. among its biggest holdings. “Everyone who wants to shift into AI basically has to use Nvidia’s products,” Malik said.
The majority of more than a dozen investors interviewed by Bloomberg expect global stocks to gain as much as 9% over the next six months, with the US most likely to outperform. Against this backdrop, most said they would buy into equities even at these lofty levels.