According to Blockworks, the first half of 2024 saw AI companies leading US equities, with stocks performing impressively. The S&P 500 and Nasdaq Composite indexes gained 14.5% and 18.1% respectively, while the Dow Jones Industrial Average posted modest gains of around 4%. However, the question remains whether this momentum can be sustained.
NVIDIA, a prominent AI company, saw its stock rise by 150% during the first half of the year, contributing to over a third of the S&P's total returns. Super Micro Computer Inc. topped the S&P rankings for the first two quarters, with its stock soaring by an impressive 213%. Despite a slight stumble towards the end of June, NVIDIA's shares are still up by over 10% in the past 30 days.
However, the shift of investors from semiconductor stocks to software stocks, as observed by Morningstar analyst Jordan Klein, is a trend worth noting. Klein cited the rallies of Adobe and Salesforce as examples of this shift, although he clarified that this does not necessarily indicate trouble for semiconductor stocks.
Another significant factor influencing the stock market is the anticipation of rate cuts. Investors entered 2024 expecting six interest rate slashes, but most would now be content with just one. The Federal Reserve has maintained steady interest rates for almost a year, insisting that more data is needed before any decisions can be made. Markets are hopeful for the first cut to come in September, with Fed Fund futures markets predicting a 66% chance, according to data from CME Group.
The Federal Reserve's policy did not seem to affect the markets negatively in the first half of the year. However, it remains to be seen whether traders will start to get anxious as we move into the fall.