Big Tech confidence boosts resurgence in AI trade

The AI craze has made a triumphant return to Wall Street, with investors eagerly jumping back into the game. The recent standout quarterly results from tech giants Microsoft and Alphabet, along with the successful IPO debut of Rubrik, have reignited confidence in the potential of artificial intelligence.

Alphabet’s shares reached an all-time high, surpassing a $2 trillion market cap for the first time, while Microsoft’s shares also saw a significant increase, pushing the company’s market value over $3 trillion. According to BMO Wealth Management U.S. chief investment officer Yung-Yu Ma, “The AI investment story is intact.”

The stellar performance of Microsoft, Alphabet, and Tesla, led by Elon Musk, has propelled the S&P 500 and Nasdaq to their best weekly performance of the year. HSBC’s Nicole Inui believes that the tech sector will continue to thrive in the second half of the year, driven by the growth in AI.

Results from Microsoft and Google have provided a glimpse into how AI will drive stock performance in the future. Microsoft reported that AI services contributed significantly to the revenue growth in its Azure cloud division, while Google’s cloud revenue surged 28% with the help of AI.

Analysts are optimistic about the future of AI, with RBC Capital Markets analyst Rishi Jaluria stating, “There is real demand for AI.” The rally in tech stocks comes ahead of key earnings reports from Amazon and Apple, which will further test the strength of the AI tech trade.

The AI opportunity extends beyond Microsoft and Google, with analysts like Brad Erickson from RBC Capital Markets seeing potential in companies like Meta. As the AI trend continues to gain momentum, investors are eagerly awaiting the next big moves in the tech sector.