The summer bull run is charging forward, with mega-cap technology stocks once again leading the charge. Investors have piled back into the secular growth and AI winners that dominated 2023, betting on an imminent Fed rate cut and fresh earnings momentum.
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Nvidia has been at the vanguard, with shares of the chip giant surging over 30% since the August lows. Last week alone, Nvidia rallied 13% after Goldman Sachs reiterated its buy rating, pointing to robust data center demand for its AI chips from cloud providers. With Nvidia earnings on tap next week, bulls are expecting another blowout from the AI leader.
However, Nvidia's ascent could also lift other key semiconductor partners and suppliers leveraged to the AI boom. Chip equipment makers like Lam Research, Applied Materials, and KLA could get a boost from any upbeat capital expenditure commentary by Nvidia. AI data center plays like AMD, Marvell Technology, and Arista Networks may also have an upside catalyst from Nvidia's halo effect.
While megacaps like Nvidia, AMD, Microsoft, Alphabet, and Apple have been the primary drivers, some analysts point to the need for a broader rally to sustain this upswing. BMO Capital Markets equity strategist Brian Belski notes, "We need to see clear breakouts in semiconductor, software, cybersecurity, cloud computing and AI stocks to confirm the current strength."
To that end, a new group of elite, under-the-radar AI stocks is starting to emerge. In addition to the mega-cap winners, these cutting-edge AI hardware and software names are gaining traction. If this next wave can lift off, it could help reinvigorate the risk-on rotation back into growthtech.
With the Nasdaq notching its longest win streak of 2024, some counter-trend mean reversion may be due. But the path of least resistance still appears higher, especially if the Fed signals a dovish pivot at this week's Jackson Hole symposium. Dip buyers remain investors' best friends in this AI/mega-cap tech manic melt-up, for as long as it lasts.
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