Enthusiasm for artificial intelligence is spreading across the stock market.
Nvidia's (NVDA) earnings release on Wednesday night will mark one year since the company first shocked Wall Street with demand for its AI chips. Since then, mentions of AI on earnings calls have skyrocketed, up 186% since the first quarter of 2023, according to Bank of America Research.
This means the conversation around AI has shifted from AI chip makers like Nvidia (NVDA) and AMD (AMD) to AI power users like Alphabet (GOOG, GOOGL), Meta (META), Amazon (AMZN), and Microsoft (MSFT). This is in response to the rapid transition. . More recently, strategists have emphasized expansion into other sectors that could benefit from increased power usage, such as energy (XLE), utilities (XLU), and commodities.
“It's no longer just about NVDA,” Ohsung Kwon, U.S. and Canadian equity strategist at Bank of America, said in a note to clients on Monday.
This shift has already begun in markets. Several precious metals, including copper (HG=F), which strategists say will benefit from AI investments, have been trading higher recently. The utilities and energy sectors have been the two best-performing sectors in the S&P 500 (^GSPC) this year, up about 15% and 13%, respectively.
This has spilled over into individual stocks that are matching Nvidia's meteoric share price rise since the start of 2024, with Texas-based Vistra Corporation (VST) up about 140% this year and Constellation Energy (CEG) shares up nearly $90. %, roughly matching Nvidia's gains this year.
Morgan Stanley Chief Investment Officer Mike Wilson named utilities an overweight sector in a note on Sunday, noting that it brings “upside to the AI power theme.” Wilson said Morgan Stanley's Power & Utilities team is confident that new AI data centers, 50 times larger than before, will increase electricity consumption from 3% of total U.S. consumption in 2023 to about 10% by 2030. He emphasized that he thought it was possible.
“Increasing demand for AI data center power and more favorable data center power deals could lead to upside for both traditional and alternative energy providers,” Wilson wrote.
Companies are also playing a role in building AI.
Research by Goldman Sachs' equity strategy team, led by David Kostin, found that mentions of AI spiked in the first quarter. More than 66% of companies in the energy sector mentioned AI in their earnings calls this quarter, up from 19.1% last quarter.
Considering the big-picture implications, investors will likely keep an eye on Nvidia's report on demand for AI chips.
So far, Nvidia has surprised investors multiple times in this space, consistently beating analysts' expectations with quarterly results and boosting its outlook for the next quarter on the back of robust demand for its AI servers.
Whether this trend continues or breaks could have implications for a variety of sectors.
“If the market realizes, “Maybe I got a little too excited and brought some of the profits forward a little bit,'' and that is reflected in valuations, I think it could lead to a slightly unstable situation.” Jack Manley, global market strategist at JPMorgan Asset Management, told Yahoo Finance.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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