Wall Street hunts for more AI gold after Nvidia's soaring rally

FE Team | Published: March 04, 2024 00:02:42

NEW YORK, March (Reuters): Money managers are scrambling to cash in on the stock market's interest in artificial intelligence, as a stunning rally by Nvidia, opens new tab sparks a search for other companies that are capitalizing on the technology.
Shares of Nvidia - whose chips are the gold standard in the AI industry - are up about 60 per cent this year after tripling in 2023. The run has pushed its market value to roughly $2 trillion, making it the third-largest US company by market cap after Microsoft, opens new tab and Apple, opens new tab.
It has also spurred Wall Street to search for other AI-focused companies in hopes of catching outsized moves. Whether investors are looking at the broader chip industry or betting on firms elsewhere in the value chain, they agree on one thing: AI is here to stay.
"It's not a fad," said Francisco Bido, senior portfolio manager for F/m Investments' Large Cap Focused Fund. "There are too many ... cases where companies can make really good use of the technology to enhance both their top and bottom lines."
Excitement over AI helped power the Nasdaq Composite Index, opens new tab to a record high on Thursday, while the S&P 500, opens new tab also marked its latest record. The indexes are both up about 7 per cent this year.
Further signs of the growing fixation on AI have been easy to spot. Mentions of AI on conference calls reached a new high in the fourth quarter, Goldman Sachs said recently. The bank's analysts have estimated artificial intelligence technology could add 1.5 percentage points to US productivity growth if there is widespread adoption over the next decade.
A Morgan Stanley survey of chief information officers suggests 2024 is "a Year of Investment for AI," the bank said in a note this week, with CIOs naming AI/machine learning as their top priority for the first time.
Bido's fund retains a large holding in Nvidia, but has branched out into other AI plays, including rival chipmaker Advanced Micro Devices, opens new tab and MongoDB, opens new tab, whose database products could be in high demand as AI is poised to change data infrastructure needs.
Those stocks have risen sharply, although less dramatically, than Nvidia and some other AI plays that have recently captured the market's attention. AMD shares are up 30 per cent year-to-date, for example, while Mongo's have risen 9 per cent, though the shares of both companies doubled last year.