The AI trade is back, as confidence in Big Tech surges

The AI ​​craze has returned to Wall Street – and investors are buying in.

Noteworthy quarterly results from Microsoft (MSFT) and Alphabet (GOOG, GOOGL) and the well-received IPO of Rubrik (RBRK) have put the AI ​​narrative back on track, sparking renewed confidence in the makes big tech’s expensive bets on flashy tools spur growth. .

Alphabet shares hit an all-time high Friday, closing above a $2 trillion market cap for the first time. Microsoft shares finished up 1.8%, posting a market value just over $3 trillion.

“The AI ​​investment story is intact,” Yung-Yu Ma, chief investment officer of BMO Wealth Management in the United States, told Yahoo Finance.

The outperformance of Microsoft and Alphabet, as well as Elon Musk’s automaker Turn AI Play Tesla (TSLA), pushed the S&P 500 (^GSPC) and Nasdaq (^IXIC) to their best weekly performance this year.

“They are generating profits,” HSBC’s Nicole Inui told Yahoo Finance. “This is a long-term growth story, and we believe the sector will continue to remain strong in the second half of the year. »

The results from Microsoft and Google gave Wall Street its first glimpse of how AI will drive stocks in the years to come. Microsoft said AI services accounted for 7 percentage points of the 31% revenue increase in its Azure cloud division.

Meanwhile, AI’s growing contributions helped Google’s cloud revenue grow 28% year-over-year.

“The feedback from Google and Microsoft tells us there is real demand for AI,” RBC Capital Markets analyst Rishi Jaluria told Yahoo Finance. “It’s not just hype, it’s not just people talking about it. There is real capital that is put to good use.

In a note to clients this week, Bank of America’s Michael Hartnett wrote that “mega-cap growth’s tight leadership” will remain intact until recession threats materialize.

And the opportunities in AI extend far beyond Microsoft and Google – the two companies often considered by Wall Street to be leaders in the AI ​​race.

RBC Capital Markets Internet analyst Brad Erickson told Yahoo Finance that Meta’s (META) post-earnings selloff was an “overreaction” and believes AI will be a “transformation engine” for the business.

“We would buy it,” Erickson said.

The rally in several Mag 7 stocks comes ahead of key results from Amazon (AMZN) and Apple (AAPL) next week – two earnings reports that will provide another critical test for AI technology trading in a context of exorbitant valuations.

Curious about the best Mag 7 name to trade in May amid the acronym’s comeback? In the latest episode of the Opening Bid podcast, we discuss exactly that. Log in below.

Sean Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Advice on deals, mergers, activist situations or anything else? Email

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Sara Adm

Aimant les mots, Sara Smith a commencé à écrire dès son plus jeune âge. En tant qu'éditeur en chef de son journal scolaire, il met en valeur ses compétences en racontant des récits impactants. Smith a ensuite étudié le journalisme à l'université Columbia, où il est diplômé en tête de sa classe.Après avoir étudié au New York Times, Sara décroche un poste de journaliste de nouvelles. Depuis dix ans, il a couvert des événements majeurs tels que les élections présidentielles et les catastrophes naturelles. Il a été acclamé pour sa capacité à créer des récits captivants qui capturent l'expérience humaine.
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