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Nvidia soars but animal spirits are confined

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Nvidia’s astonishing gains – it’s up almost 40 per cent over the past month and 170 per cent this year – raise the question: are animal spirits driving stocks?

They may be driving some stocks but investors are being selective in their AI purchases. Looking at the main ETFs that focus solely on AI-related stocks shows more than half have actually fallen this year. One such stock, Salesforce, recently suffered its biggest one-day drop in 20 years after missing revenue expectations.

The same is true of tech stocks in general. Although the Nasdaq keeps hitting highs, more component stocks are hitting 52-week lows than 52-week highs.

Looking beyond technology, Ritholtz Wealth Management’s Michael Batnick notes that while the S&P 500 is up 15.5 per cent in 2024, the median stock is up less than 5 per cent. Over the past 30 days, only one in six stocks has outperformed the index, easily the lowest reading of the past decade.

Investors have decided a few mega-cap tech stocks like Nvidia are the only ones with the scale to benefit from AI, says Bespoke Investment.

Basically, the mega-caps are soaring, but everyone else? Not so much.

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