The AI boom is back on Wall Street, and investors are buying back.
Outstanding quarterly results for Microsoft (MSFT) and Alphabet (GOOG, GOOGL), as well as a well-received IPO debut for Rubrik (RBRK), put the AI story back on track and led to flashy tools from big tech companies. There is new confidence that high-stakes bets on are driving growth.
Alphabet stock soared to an all-time high on Friday, closing with a market cap of more than $2 trillion for the first time. Microsoft stock ended up rising 1.8%, taking the market to more than $3 trillion.
“The story of AI investing remains the same,” Yun Yu Ma, U.S. chief investment officer at BMO Wealth Management, told Yahoo Finance.
Performances from Microsoft and Alphabet, along with Elon Musk’s automaker-turned-AI Tesla (TSLA), propelled the S&P 500 (^GSPC) and Nasdaq (^IXIC) to their best weekly performances of the year.
“They’re profitable,” HSBC’s Nicole Inui told Yahoo Finance. “This is a long-term growth story and we believe the sector will continue to perform well in the second half of this year.”
Microsoft and Google’s results gave Wall Street an early glimpse into how AI could boost stock prices for years to come. Microsoft announced that AI services accounted for 7 percentage points of the 31% revenue increase for its Azure cloud division.
Meanwhile, Google’s cloud revenue increased 28% compared to a year ago due to increased contribution from AI.
“Comments from both Google and Microsoft show there is real demand for AI,” RBC Capital Markets analyst Rishi Jallia told Yahoo Finance. “This isn’t just hype, it’s not just people talking about it. There’s real capital being leveraged.”
Bank of America’s Michael Hartnett wrote in a note to clients this week that “narrow mega-cap growth leadership” will remain in place until the threat of a recession materializes.
And the AI opportunity extends far beyond Microsoft and Google. These two companies are often seen by Wall Street as leaders in the AI race.
Brad Erickson, an internet analyst at RBC Capital Markets, told Yahoo Finance that the post-earnings sale of META was an “overreaction” and believes AI will be a “transformational force” for the company. He said he is doing so.
“We would buy it,” Erickson said.
The rally in several Mag 7 stocks comes ahead of major earnings releases from Amazon (AMZN) and Apple (AAPL) this week. These two earnings reports will be another important test for the AI technology industry amid soaring valuations.
As the Mag 7 acronym makes a comeback, are you curious about the best Mag 7 names to trade in May? In the latest episode of the Opening Bid Podcast, we discuss just that. See below.
sheena smith Anchor of Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Have a tip about a deal, merger, activist situation, or more? Email seanasmith@yahooinc.com.
Click here for the latest technology news impacting the stock market.
Read the latest financial and business news from Yahoo Finance
