BlackRock doubles down on AI and US tech companies via

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That's how convinced they are about the rise of AI at BlackRock (NYSE: ), according to LSEG DataStream data, highlighting that the sector has gained 30% this year, roughly four times the rest of the S&P 500. The fold is more.

“Looking back to 2023, tech's dominance is even clearer: the sector has gained 100% since then, while the rest of the index is up 24%. AI will light up corporate earnings for tech firms. has helped drive this outperformance,” explained BlackRock analysts in their latest weekly market commentary.

These experts echo analysts' forecasts, expecting growth of 20% over the next 12 months, which is higher than the rest of the market forecasts. “Tech firms have lived up to big expectations so far: their revenue grew 23% year-over-year in Q1. In a world where mega-forces — major structural changes — return now and into the future, our view AI's impact on revenue in the short and long term,” the firm added.

Solid balance sheets

“Strong balance sheets are also one of the reasons we like tech, and we're less concerned about valuation metrics. Free cash flow — excluding operating expenses — as a share of sales is roughly the same for tech as compared to the broader market. Two-fold, and tech has the highest profit margins of all sectors, LSEG data stream data shows,” notes BlackRock.

“In addition, many top tech names are highly profitable and cash-flush, allowing them to fund the construction of AI infrastructure such as data centers,” the analysts add.

America vs. Europe

According to BlackRock, “The search for such quality has encouraged investors to flock to U.S. stocks in recent weeks as their European counterparts retreated.”

“Most of the volatility in European stocks came after the EU election results and news of snap elections in France,” he notes.


What can stop the rise of tech stocks? According to BlackRock, “Markets may lose favor with the sector if expectations for AI diminish, such as if they perceive that corporate spending on AI has not boosted earnings or margins.”

“Any regulatory changes that limit adoption could also affect the ability to support AI technology. In a less likely scenario, other sectors could outpace the tech if development accelerates, and “Inflation falls enough to allow the Federal Reserve to cut interest rates more than expected,” experts add.

“Bottom line: A concentration in US tech stocks is a feature of the AI ​​theme, not a flaw. We remain overweight US stocks for six to 12 months, over the strategic horizon and still prefer the AI ​​theme. We see industrials and healthcare as stocks grow,” he concludes.

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