Nvidia was the S&P 500’s best-performing stock during the first half of 2024, buoyed by an impressive 150% return. This remarkable performance was not entirely unexpected given Nvidia’s prominent role in the ongoing generative AI revolution. The company’s market value surged from $1.2 trillion to over $3 trillion, driven by a 600% increase in annual profits and the escalating demand for its graphics processing units.
Despite the spotlight on Nvidia, several other companies delivered surprising returns. Super Micro achieved the S&P’s highest year-to-date return at 188%, although its stock slipped by over 15% after joining the index on March 18. Other notable performers in the AI and tech sectors included Micron, up 54%, and CrowdStrike, up 51%.
The rise of AI also benefited companies outside of the traditional tech sector. Constellation Energy, NRG Energy, and Vistra, all utilities, saw substantial gains. Vistra’s stock skyrocketed by 125%, Constellation Energy increased by 72%, and NRG Energy rose by 52%.
Nvidia’s dominance in AI landscape
These companies attributed their growth to the burgeoning demands of AI data centers, demonstrating how the AI boom is influencing various sectors of the stock market. The utilities sector emerged as the third-best performer among the S&P’s 13 sectors, trailing only the information technology and communication services sectors, which include AI-centric companies like Nvidia and Super Micro.
This resurgence in the utilities sector marks a significant turnaround from 2023, when it was the S&P’s poorest performer, losing 10.6% as the S&P gained 26%. Higher interest rates, which reached their highest levels since 2001, had severely impacted the sector. The conventional wisdom that high-interest rates dampen utility stocks’ performance was defied as the broader stock market, including the tech-heavy Nasdaq and Dow Jones Industrial Average, hit all-time highs in 2024.
Despite these gains, some analysts remain skeptical. The Wells Fargo Investment Institute downgraded its rating on the utilities sector to “unfavorable” in its midyear outlook, questioning the long-term sustainability of these gains. Sameer Samana from Wells Fargo explained that the utilities sector stands to benefit less directly and immediately from the AI boom compared to other industries.
In conclusion, while Nvidia’s unprecedented growth underscores its dominance in the AI landscape, the surprising rise of particular utility companies and other tech stocks highlights the broader impact of AI across various sectors. As the demand for AI-related technologies grows, these companies are well-positioned to capitalize on the evolving market dynamics.
