Viewed as a whole, the U.S. stock market has seen a continued AI rally, shifting focus to different groups of stocks while retaining its power. The first to rise to the market were the big tech stocks of the so-called Magnificent Seven, including Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. As the rally spread, traders raised bids on stocks that designed, produced or were otherwise connected to semiconductors — the silicon chips needed to make AI work. Additionally, various other stocks also gained, including equipment and generator companies like Caterpillar, utility companies, and even fossil fuel companies like Exxon Mobil, which are helping to satiate AI data centers’ voracious appetite for electrical power.
In fact, virtually everywhere you look, AI is a factor – even if it’s not always favorable. Software stocks, like Oracle, Salesforce and even Microsoft (also a major developer of AI data centers), have been hit by fears that AI agents could render many of their profit centers useless. This interpretation of the implications of AI is open to question. The fact is that, for better or worse, it’s hard to avoid AI in the stock market.
A global view
Take international equity funds. They returned 12.8 percent in the three months through June, according to Morningstar. Over 12 months, international equity funds did even better, with a return of 26.8%, 3.6 percentage points ahead of domestic equity funds.
You might think this is a result of diversifying away from AI, but you would be wrong. Rather, it reflects the global strength of the AI business. For example, if you own an index fund, like the Vanguard Total International Stock Fund (as I do, in a workplace retirement account), you’ll find that its top five holdings are all AI-adjacent. These include Taiwan Semiconductor Manufacturing, Samsung Electronics, SK Hynix, ASML and Tencent.
Emerging market funds, driven by some of the same stocks, also saw a sharp rise, with a quarterly return of 22.4 percent and a 12-month gain of 45.9 percent.
