The focus of market commentary throughout much of 2024 was on the reliance of markets on an elite group of high-performance mega-cap tech corporations, more specifically, Nvidia, an artificial intelligence (AI) colossus. However, as of now, the scenario has shifted remarkably.
The MSCI World index and the S&P 500 have consistently been smashing records, with the American index showing an increase exceeding 20 per cent in 2024, marking its greatest year-on-year increase this century.
A comparison reveals only Meta, which owns Facebook, amongst the acclaimed seven leading stocks, has set new records. Majority of the remaining tech majors reached a high point in July, but since then, companies including Nvidia (-15%), Alphabet, the parent company of Google (-13%), Microsoft (-11%), Amazon(-8%) and Apple (-5%) have not been able to surpass their previous record highs.
A few key lessons can be drawn from this. Primarily, as per Barclays, the hype surrounding AI seems to have “presumably peaked” evidenced by the recent tech retraction despite favourable earnings momentum. As a result, the towering valuations of big tech companies are no longer seen as excessive.
Secondly, 2024’s equity rally has diversified as investors speculate that US interest rate cuts will secure a gentle economic landing. Nearly two-thirds of S&P 500 equities outperformed the index in Q3. The average stock saw a 9.2% surge, almost twice the S&P 500’s quarterly returns. Increasing confidence among investors is driving them to look beyond tech majors, suggesting that the era of supremacy for the notable Seven may well have come to an end – at least for the time being.