Investors are buying AI and Musk any way they can: Morning Brief

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The breadth of the stock market rally has yet to arrive, as investors continue to pile into (almost) anything AI touches.

Elon Musk revealed earlier this week that Super Micro Inc. (SMCI) will provide the hardware for the supercomputer his AI startup is building. This caused a stock boom.

When the CEO of Dell (DELL) said his company would build an “AI factory” for Musk’s xAI in partnership with AI kingpin Nvidia (NVDA), its shares also rose.

Although the jumps in both names were short-lived, their performance this year and the response to Musk’s one-word post are a reminder that what he says matters to a lot of people and that anything related to AI will drive markets.

So far this year, SMCI is up more than 200%. Dell, which some are returning to the PC 1.0 world, has seen its stock nearly double.

It doesn’t take a contrived plan or a lateral approach to capitalize on Wall Street’s excitement around AI technology. The main driver of 2024’s seemingly unstoppable trajectory is the earnings potential of the Big 7 companies, which include Nvidia, Tesla and the platform giants.

Citi analysts, who earlier this week raised their year-end target for the S&P 500 to 5,600, noted that more than two-thirds of the stock market’s gains so far have flowed from the Big 7 companies.

Adding Elon to the mix certainly wouldn’t hurt.

The Super Micro news has a clear Musk dimension, and part of the multi-CEO dynamic is that his businesses cut across different industries and are themselves interconnected. But since Tesla is Musk’s only public company, most investors can only get into his other projects indirectly. If you can’t buy into xAI, why not get a cut from their suppliers?

A similar dynamic is at play in the world of artificial intelligence.

The rise of AI extends beyond hardware manufacturers as well. Investors trying to create a temporary Musk basket of related tech holdings are doing the same thing with Nvidia. Because it’s not just the big tech platforms that produce apps and productivity software that shape the abundance of AI. There’s a whole ecosystem out there.

Powering the computer systems that train and operate AI systems requires huge amounts of energy. Utility companies are riding the AI ​​wave.

Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), and Meta (META) are expected to do so. Spending a combined $200 billion this year On cloud and artificial intelligence investments, which will include building and operating data centers. In contrast, demand for energy from US data centers It is expected to double by 2030, partly due to artificial intelligence, According to estimates by McKinsey Consulting Company.

The story continues

Getting in early is nice. But the AI ​​craze proves that getting into this field is more than enough at all.

Hamza Shaaban is a reporter for Yahoo Finance covering markets and economics. Follow Hamza on Twitter @hshaban.

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