The AI juggernaut that fueled the S&P 500s (^GSPC) rally this year will continue to turn a profit in the next six to 12 months, according to BlackRock analysts.
“A case can still be put at risk,” Wei Li, global chief investment strategist at BlackRock Investment Institute, said during a media roundtable on Tuesday.
Lee and his team's reasons for bullish on equities include companies' rampant capital spending on AI and growing demand for low-carbon energy. Investments in AI data centers, for example, are expected to grow 60%-100% annually in the coming years, Lee said.
“When we add up all this Cap-X spending, we rarely see anything in history comparable to the Industrial Revolution,” he said.
As of early July, a record $6.15 trillion was sitting in money market funds as the S&P 500 hit 36 record highs this year.
In the first half of 2024, the S&P 500 gained 14.5%, with a handful of stocks leading those gains. Notably, AI heavyweight Nvidia (NVDA) accounted for nearly a third of the S&P 500's gains during the first six months of the year, while large-cap tech's strong quarterly results led the S&P 500's gains for the year. has played an important role in the increase. The year
However, BlackRock strategists don't see the concentration of equity performance as a problem because megacaps have delivered on earnings. He expects big tech companies to invest heavily in building AI and chip producers and energy and utility firms to continue to outperform.
The asset management firm's 2024 mid-year global outlook said, “We believe markets will continue to see AI winners as beneficial over the next six to 12 months.
Gargi Chowdhury, chief Americas investment and portfolio strategist at BlackRock, said investors should consider “being risk-averse, staying away from cash, and really thinking about pockets.”
Such pockets include energy, healthcare, and utilities — sectors poised to benefit from the AI boom.
The growing need to power everything from data centers to chip manufacturing plants has sent the S&P 500 Utility ETF ( XLU ) up more than 8% year-to-date, compared with a loss of about 7% in 2023.
Strategists say risks that could slow or stop AI construction include policy and regulations, rules around AI use, and the supply gap between rising demand for metals and minerals such as copper, aluminum and lithium. Includes obstacles.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow him on X. @ines_ferre.