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This Year's U.S Stock Market Rally Hasn't Been Driven by the Fed, but by Artificial Intelligence

November 19, 2023
minute read

The primary impetus propelling the surge in U.S. stocks this year is not contingent on the Federal Reserve's interest rate determinations or corporate earnings; rather, it is attributed to generative artificial intelligence, as asserted by DataTrek Research.

Year-to-date gains have been evident across all three major stock indices, as reported by Dow Jones market data. The Dow Jones Industrial Average (DJIA) has advanced by 5.4%, the S&P 500 (SPX) has recorded a notable 17.5% increase, and the Nasdaq Composite (COMP) has experienced a substantial rally of 34.9%.

Nicholas Colas, the co-founder of DataTrek Research, elucidates that the ascent in stock values has predominantly been steered by a select group of mega-cap technology stocks. Referred to as the "magnificent seven," these stocks comprise Alphabet (GOOGL), Amazon (AMZN), Apple (AAPL), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA). Collectively, these companies have contributed to approximately 118% of the S&P 500's cumulative gain for the current year, as outlined in a note by Colas on Friday.

The impressive performances of these technology behemoths have overshadowed the influence of the Federal Reserve's policy decisions and corporate financial results, traditionally considered pivotal factors in shaping the stock market trajectory. This paradigm shift, according to DataTrek Research, underscores the growing impact and dominance of generative artificial intelligence in steering market dynamics.

The Dow Jones Industrial Average's 5.4% increase exemplifies the resilience and strength of the market, while the S&P 500's substantial 17.5% rise underscores the broader positive sentiment pervading the equities landscape. However, the most noteworthy surge is observed in the Nasdaq Composite, which has surged by an impressive 34.9%, a testament to the substantial influence of the identified mega-cap technology stocks.

Nicholas Colas' identification of the "magnificent seven" as the driving force behind the S&P 500's gains emphasizes the concentrated impact of a handful of tech giants on the broader market. These companies, renowned for their innovation and market dominance, have collectively outpaced various sectors, reinforcing their pivotal role in steering the overall market performance.

In delineating the dominance of generative artificial intelligence, DataTrek Research sheds light on a novel narrative in market analysis. While conventional factors like Federal Reserve decisions and corporate earnings remain influential, the ascendance of AI-driven dynamics is increasingly shaping market trends. The transformative impact of generative artificial intelligence is evident in the disproportionate contribution of technology stocks to the year-to-date gains, showcasing a paradigm shift in the market's operative forces.

As market participants navigate these evolving dynamics, the role of generative artificial intelligence in propelling stock values to new heights becomes a focal point of analysis and discussion. The "magnificent seven" exemplify the nexus between technological prowess and market dominance, redefining traditional notions of market drivers and reinforcing the transformative influence of AI in the contemporary financial landscape.

Cathy Hills
Associate Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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