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2024 is entering its homestretch, and large-cap growth stocks could be making a comeback.
Technology, communications and consumer discretionaries are the three best-performing sectors in the last month, according to TradeStation data.
That’s important for at least two reasons. First, those sectors are home to the biggest and most important members of the S&P 500. Apple (AAPL), Nvidia (NVDA) and Microsoft (MSFT) are tech companies. Alphabet (GOOGL) and Meta Platforms (META) are communications stocks. Amazon.com (AMZN) and (Tesla) are consumer discretionaries.
Second, these large companies have tended to pull the broader market higher or lower. For example, the 2022 bear market started with weakness in growth stocks. The rebound in March 2023 was led by AI stocks like Nvidia (NVDA). Those same companies faltered in July 2024, triggering a sharp pullback in the S&P 500.
This relationship is highlighted by the chart above of the Nasdaq-100. Its lower study compares the relative strength of the index with the S&P 500 in the preceding 21 sessions (roughly a month). Notice how the Nasdaq has pushed ahead of the broader index since late September.
Holding the current price zone could be important for at least two reasons. First, it would suggest that support has developed around a weekly closing high from the summer. Second, it would represent the third straight higher monthly low. Those patterns are potentially consistent with uptrends.
While semiconductors have led the AI boom so far, this week witnessed a surge in software makers.
Palantir (PLTR), Palo Alto Networks (PANW) and Synopsys (SNPS) were some of the biggest movers. There seemed to be few specific headlines, which potentially suggests investor rotation could be underway near the start of the quarter.
Still, there has been a general buzz about the next wave of AI. Nvidia (NVDA) presented a range of tools that will let non-tech companies build AI tools. Some of the key products and services include:
NVDA’s presentation follows last month’s Salesforce.com’s (CRM) release of “Agentforce,” which helps companies use autonomous AI tools. Several analysts, including Wedbush, Northland Securities and Baird issued positive notes on CRM after the event.
A separate report from Citi forecast that data-center capital spending will rise about 40 percent for big cloud-computing firms like AMZN and MSFT. Arista Networks (ANET) and Cisco Systems (CSCO) were named as potential beneficiaries.
Speaking of MSFT, the software giant is stuck under its old highs despite peers breaking out. Yesterday it got downgraded by Oppenheimer on worries that earnings estimates are too high.
Don’t forget there are more catalysts tomorrow when Advanced Micro Devices (AMD) holds its Advancing AI 2024 conference and TSLA unveils robotaxis.
In conclusion, chip stocks like NVDA have led the AI boom so far. But now there could be signs of the movement widening as “Agents” become the new buzzword and software companies get active.
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