It’s the best of times for the stock market. Forget the worst of times – we’re back solidly into the “stocks only go up” camp.
So toss your Dickens into the recycling bin; we’re on a Hunter S. Thompson-esque trip through AI-land.
But even then, it’s not just every company that’s along for the ride. Since the launch of ChatGPT in late 2022, less than 10% of stocks have accounted for the lion’s share of the market’s gains:
A mere 41 stocks in the S&P 500 have been responsible for 70% of the market’s move since the launch of ChatGPT in late 2022. (Source: Bianco Research)
Today, investors are putting the AI story into overdrive. A mere 41 stocks, less than 10% of the S&P 500 Index, have accounted for a full 70% of returns in the past three and a half years.
And year to date, non-AI stocks have underperformed, with an equal-weighted market index trading flat.
Nvidia’s (NVDA) latest announcement of new Windows-based computer processors is giving the market another reason to feel bullish today. It’s hard to have the market go down when giants like Microsoft (MSFT) jump 3% on news like that.
And, of course, a peace deal with the U.S. and Iran is just about finalized – for about the 60th time. While that headline has gotten a bit silly, every rumor about an imminent peace deal with Iran has given stocks a boost – with AI names getting the bulk of the move.
In time, this trend will change, perhaps quickly. And by many measures, stocks are overextended. But investors continue to pile into the AI trade.
And for now, we’re still in a “buy the rumor, and hype” moment.
While most AI stocks have seen their value soar to the point where they’re uncomfortably overbought, there are still a few AI plays that trade at a reasonable value today. For one such name, become a member of Grey Swan Pro — details here.
~ Andrew
P.S. The AI story is providing earnings growth for the stock market right now, which in turn is helping the narrative that AI stocks have more room to rise.
That’s true even as inflationary pressures exist – pressures that, in the past, would have created more cautious markets. Another story right now is more behind-the-scenes: a scramble to secure future resources, from oil to metals and beyond. We’re calling it The Great Race.
We covered this Great Race to adjust to a world of more persistent inflation in yesterday’s Grey Swan Live! If you’re a paid-up member, you can access the full replay, right here:
If you have any questions for us, send them to Feedback@GreySwanFraternity.com.
