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Here’s how the AI is shaping the stock market

Here's how the AI is shaping the stock market

Earlier this year, Finbold highlighted the extraordinary surge in the S&P 500 index, attributing its success to the formidable dominance of the Magnificent Seven—comprising Apple , Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla

These companies’ substantial involvement in the artificial intelligence (AI) sector has not only driven their individual gains but also significantly influenced the broader market trends. By September, the stocks contributed to over 50% of S&P 500’s gains. 

In the subsequent months, their influence has only intensified, indicating a rising influence of the AI boom in determining the trajectory of the stock market.

S&P 7 are up 80% in 2023

Compared to around 50% two months ago, the S&P 7’s gains currently stand at a whopping 80%, popular market commentary account The Kobeissi Letter noted in a November 27 post.

At the same time, the remaining 493 companies tracked by the index, or simply S&P 493, saw combined growth of a mere 4% this year. Put differently, the S&P 7 is up 20 times as much as the S&P 493. 

S&P 7’s whopping 80% surge in 2023. Source: The Kobeissi Letter

As Kobeissi aptly put it, “a few key stocks have essentially become the entire market.”

“The fate of the stock market is in the hands of tech companies and AI hype.”

– it added.

Top S&P 7 performers

The tech-oriented Nasdaq 100 index surged around 47%, compared to the S&P 500’s 19% surge, signaling the market’s 2023 has been primarily driven by technology companies.

The big seven tech giants accounted for a remarkable 70% of Nasdaq’s year-to-date gains. Two of these stocks, NVDA and META, registered triple-digit returns of 237% and 168%, respectively. 

Driven by unprecedented demand for their AI and cloud services, both stocks are trading near their all-time highs. 

Finbold’s recent calculations revealed a staggering trend as the top 12 companies in the AI sector collectively amassed an impressive $2.86 trillion in market capitalization from January to November 2023. As of November 9, the cumulative market cap for these entities reached $7.28 trillion, marking a substantial 65% growth from the $4.41 trillion recorded in January. 

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While countless investors are enjoying the S&P 500 and Nasdaq’s impressive rallies, a crucial question looms large:

What happens when these market-shaping stocks witness a pullback?

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