The S&P 500 rose 78% over three calendar years, driven by excitement about artificial intelligence and investors moving into AI-related companies. Early in the year, concerns including geopolitical conflict and doubts about long-term AI revenue pressured investors, leading to a rotation into sectors viewed as safer, such as pharmaceuticals and consumer staples. Those areas offer more stable demand because patients need medicines and consumers need essentials. AI growth remains supported by corporate earnings and forward communications indicating strong AI demand. The rotation created a rare buying window on the Nasdaq, with some AI stock valuations falling, and that window remains open for investors seeking AI growth exposure. Meta Platforms is highlighted as one of the best AI growth stocks to buy right now.
"Artificial intelligence (AI) stocks have soared over three years, driving the S&P 500 through this bull market. In these past three calendar years, the index advanced 78% thanks to this excitement about the technology. Investors loved the idea of getting in on something game-changing in its earliest days, so they flocked to AI players."
"Then the great rotation happened. Early this year, a variety of concerns -- from worries about the conflict in Iran to questions about the long-term AI revenue story -- weighed on investors' minds, and this led them to rotate into other sectors viewed as safer. These are areas such as pharmaceuticals and consumer staples -- patients need their medicines and consumers need certain essentials regardless of the economic backdrop, and this offers revenue at these companies a certain stability."
"The AI growth story isn't over, however, and investors have realized this as they've returned to these stocks in recent weeks. Corporate earnings and communications about the future show AI demand is strong, and this supports the long-term growth story. But the great rotation accomplished something positive for tech investors: It created a rare buying window on the Nasdaq, meaning certain stocks saw their valuations plummet. And in many cases, that window remains open."
"You probably know Meta Platforms well for its leadership in the world of social media. The company owns popular apps such as Facebook and Instagram, and more than 3.5 billion people use at least one of Meta's apps daily. But Meta has also been making its mark on the world of AI. The company has developed large language models, formed a superintelligence lab led by experts in the field, and is investing heavily in building out AI infrastructure."
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