AI stocks, such as Nvidia (NVDA), Microsoft (MSFT), Broadcom (AVGO), and Oracle (ORCL), have seen their stocks increase rapidly in 2020. The S&P 500 has gained roughly 9% on the year whereas Nvidia, Microsoft, Broadcom, and Oracle have gained over 20%. This is mainly due to improvements to their products through Artificial Intelligence (AI). Nvidia’s growth in particular has been spurred on by its AI enhancements.
These stocks and their accompanying performances have garnered significant attention, earning them a place in a “momentum” index, such as the iShares MSCI USA Momentum Factor Exchange-Traded Fund (MTUM). This index focuses on stocks that exhibit high performance with low volatility, and has a technology sector weighting of 3% which should move up to 21% on May 26 following a rebalance.
Investors are now asking what impact this new attention will have on the stocks of Nvidia, Microsoft, Broadcom, and Oracle in the near term. With the market value of all the ETF’s shares reaching around $9 billion, Chris Harvey of Wells Fargo believes it could be enough to move the needle. However, there is also the potential for profit taking or investors selling off these stocks, which could counter the buying, resulting in a flat or declining stock.
The positive here is that the increased presence of the AI stocks in this index is an indication of the investment returns the market should continue to benefit from AI. Whether these companies can live up to the hype and provide consistent returns is yet to be seen, but the path to success is rooted in positive performance in the near term.
Nvidia is an American technology company based in Santa Clara, California that designs and manufactures computer graphics, chipsets, and other computing and artificial intelligence-related hardware. Founded in 1993, the company has become a leading player in AI, self-driving cars, data centers and gaming.
Kevin Simpson is the Founder and Chief Investment Officer of Capital Wealth Planning. He has experience in the tech industry and has worked in a professional capacity over 25 years. His expertise covers retirement, taxes, investments, estate planning, and insurance. Simpson believes that the increased presence of these AI stocks in the momentum ETF has the potential to affect the stock’s performance.
