From Morningstar: 2024-10-21 07:01:00

Stocks related to artificial intelligence have bounced back, leading the market to new highs after July and August sell-offs due to recession fears. The Morningstar US Market Index is up 13.19% since August, with technology contributing the most gains, followed by financial services boosted by strong bank earnings.

AI giant Nvidia led the rally, contributing 1.72 points to the US Market Index’s gain. AI-related companies like Apple, Amazon, Meta Platforms, Microsoft, and Broadcom also saw significant gains. The recovery contrasts with earlier third-quarter trends of investors rotating out of big-company tech stocks into smaller value stocks.

The Morningstar Global Next Generation Artificial Intelligence Index rose 30.94% in 2024, outperforming the overall US market. While AI stocks have regained momentum since August, concerns about overvaluation have arisen as the average AI stock now trades at a 7% premium to its fair value estimate. The market may be questioning the further growth potential of AI stocks.

The recent tech rally resembles the gains seen from 2022 to 2024, with technology stocks leading the market and contributing a significant percentage of the overall gains. Financial services and other key sectors also made substantial contributions during both rallies, highlighting the cyclical nature of the market. The trends suggest a familiar pattern in market behavior.



Read more at Morningstar: Which AI Stocks Are Leading US Markets to New Highs?