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The broadening of the stock market rally hasn’t yet arrived as investors keep piling into (just about) anything AI touches.
Elon Musk revealed earlier this week that Super Micro (SMCI) will provide hardware for the supercomputer his AI startup is building. That triggered a pop in the stock.
When Dell’s (DELL) CEO said his company would be building an “AI factory” for Musk’s xAI in partnership with AI kingpin Nvidia (NVDA), its shares also rose.
And though the jumps in both names were short-lived, their performance this year and the response to Musk’s one-word post are reminders that what he says matters to a lot of people and that anything related to AI will push markets around.
So far this year, SMCI is up over 200%. Dell, which to some harkens back to a PC 1.0 world, has seen its stock nearly double.
It doesn’t take a contrived plan or a sideways approach to profit from Wall Street’s excitement around AI technology. The main driver of 2024’s seemingly unstoppable run is the earnings potential of the Magnificent Seven, which includes Nvidia, Tesla, and the platform giants.
Citi analysts, who earlier this week upped their S&P 500 year-end target to 5,600, observed that more than two-thirds of the stock market’s gains so far have flowed from the Magnificent Seven.
And adding Elon to the mix certainly doesn’t hurt.
The Super Micro news has a clear Musk dimension, and part of the multi-CEO’s dynamism is that his businesses cross into different industries and are themselves interconnected. But since Tesla is the only public Musk company, most investors can only get in on his other ventures indirectly. If you can’t buy into xAI, why not acquire a piece of its suppliers?
A similar dynamic is at play within the world of AI.
The AI rally extends beyond hardware manufacturers too. Investors attempting to create a makeshift Musk basket of related tech holdings are doing the same thing with Nvidia. Because it’s not just the Big Tech platforms churning out apps and productivity software that are drafting off AI exuberance. There’s an entire ecosystem out there.
Powering the computer systems that train and run AI systems requires huge amounts of energy. Utility companies are catching a ride on the AI wave.
Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), and Meta (META) are expected to spend a combined $200 billion this year on cloud and AI investments, which will include building and running data centers. In turn, power demand from US data centers is expected to more than double by 2030, in part because of AI, according to estimates from consulting firm McKinsey.
Getting in early is nice. But the AI frenzy is proving that getting in at all is more than enough.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on Twitter @hshaban.
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