Heavyweight! Top asset management giants support the AI frenzy: "AI leaders" such as NVIDIA will continue to drive the bull market

According to the financial news app Zhitong Finance, market strategists and fund managers from top global asset management institutions believe that the unprecedented investment frenzy surrounding artificial intelligence in the global stock market is far from over. Stocks of AI leaders such as NVIDIA, which have repeatedly hit new highs, are expected to continue to drive a "long bull trend" in the global stock market after a brief adjustment period. Some economists even predict that the optimistic sentiment based on the development of AI technology will drive additional multiple expansion expectations, leading to the S&P 500 index reaching a historical peak of 7000 points in 2025.

It is understood that fund managers and market strategists from global asset management giants such as BlackRock Inc. and BNP Paribas Asset Management have expressed that they expect artificial intelligence to become one of the most important investment themes in the global stock market in the second half of this year, serving as a core driver of market highs.

While most strategists expect that AI chip leader NVIDIA (NVDA.US) and other large technology companies benefiting from the global deployment of AI technology will continue to lead the way, some strategists and fund managers also believe that secondary and tertiary beneficiaries of artificial intelligence, including utilities and infrastructure providers, are expected to play an important role in the future. Almost all strategists and fund managers unanimously believe that the investment frenzy surrounding AI is far from fading.

Wei Li, Global Chief Investment Strategist at BlackRock Investment Institute, stated: "We expect artificial intelligence to be one of the key themes in the second half of the year." "This is a concentrated rebound, a significant feature of the AI transformation, rather than a loophole in the market. Under the drive of AI, the concentration of technology stocks in the stock market itself is not a concern for us."

Since the end of 2022, the S&P 500 index has surged by over 40%, with the "Magnificent 7" of the US stock market led by NVIDIA and Microsoft, known as the big winners in the AI investment theme, contributing up to 60% of this increase. While for some market forecasters, this rapid rise is reminiscent of the dot-com bubble era, many strategists from global asset management institutions believe that this round of investment frenzy around AI is mainly supported by strong actual profits and optimistic profit prospects.

The "Magnificent 7" includes: Apple, Microsoft, Google, Tesla, NVIDIA, Amazon, and Meta Platforms. Global investors have flocked to these seven tech giants in 2023 and the first half of 2024, mainly because they are betting on the fact that due to the huge market size and financial strength of these tech giants, they are in the best position to leverage AI technology to expand revenue

In addition, the resilient global economic growth, coupled with the betting on interest rate cuts by the world's largest central bank (i.e. the Federal Reserve), has also boosted market investment sentiment. However, the controversial U.S. presidential election scheduled for November may disrupt this rebound.

Currently, some fund managers are betting that companies with expertise in artificial intelligence (AI) technology, whether focusing on AI infrastructure (such as NVIDIA AI GPU) or AI software (such as ChatGPT), may continue to outperform already high performance and market share expectations. They expect that traditional industries including materials, traditional energy, clean energy, and industrial sectors will also benefit from the global trend of heavy investment in AI.

Saira Malik, Chief Investment Officer at Nuveen Asset Management, stated: "Undoubtedly, NVIDIA is currently the biggest winner in this field (AI), basically in any case." Nuveen Asset Management manages assets of up to $13 trillion. Funds led by Saira Malik have NVIDIA (NVDA.US), Apple Inc. (AAPL.US), and Amazon.com Inc. (AMZN.US) as their top holdings, believing that these tech giants will be the biggest winners in the AI trend. "Basically, every company looking to pivot towards the AI trend must use NVIDIA's products," Malik said.

AI will remain the core driver of the stock market! Economists are calling out: AI is expected to help the S&P 500 index rise to 7000 points next year

Among the dozen large institutional investors surveyed by the media, most institutional investors expect the MSCI Global Stock Market Index, the global stock market benchmark, to rise by 9% in the next six months, with the U.S. stock market, which holds the largest weight in the MSCI Global Stock Market Index, most likely outperforming the global stock market benchmark.

These investors believe that the unprecedented investment frenzy surrounding AI in the stock market is far from over. After a brief adjustment, the stock prices of AI leaders such as NVIDIA, which have repeatedly hit new highs, will continue to drive the global stock market to continuously set new historical highs. In this context, most investors stated that even at such high prices, they would choose to buy stocks or lean towards a buy-on-dip strategy.

Neil Shearing, Chief Economist at Capital Economics, believes that **AI may help the S&P 500 index reach a historical peak of 7000 points in 2025, although he also sees similarities with the previous "dot-com bubble period." Shearing wrote in a client report on Monday: "The experience of the dot-com bubble suggests that U.S. stock market valuations can rise further - the additional multiple expansion expectations driven by AI optimism are the reasons we believe the S&P 500 index may reach 7000 points next year Shearing said that the current situation seems to be that AI is following the "Gartner Hype Cycle," which shows how public perception of new technologies evolves over time. Economist Shearing insists that the AI revolution will begin to have a positive impact on economic growth in the second half of this decade.

Ronald Temple, Chief Market Strategist at Lazard, said, "There is still room for the stock market to rise at its current level." "If you look back over the past few months, the decline has been very small, in part because there is money waiting on the sidelines to be put to work. Therefore, waiting for an economic downturn may actually be a bad strategy."

The focus will soon shift to the profit data of large tech companies such as NVIDIA. Market expectations are high, with Wall Street analysts generally predicting that the overall earnings per share of S&P 500 index companies for the next 12 months will reach a historic high. Expectations for the performance of the seven major tech giants in the US stock market in Q2 are also very high. If the performance of a giant falls short of expectations, these giants, which have a high weight in the S&P 500 index, may trigger a pullback in the index. The upcoming US earnings season will begin on July 12th, when Wall Street giants like JP Morgan will be the first to announce their second-quarter results.

"I am generally optimistic about the stock market," said Sophie Huynh, Senior Cross-Asset Strategist at the asset management arm of BNP Paribas in France. "We are in the final mile of the global fight against inflation, and from both a price-earnings ratio and earnings growth perspective, this should be favorable for the stock market."

One of the highlights of this season will once again be the financial data of NVIDIA, the "shovel seller" in the AI field, which is expected to be released in late August. Investors are looking for evidence of whether the artificial intelligence boom is still ongoing. So far, this chip giant has exceeded Wall Street's high performance expectations for several quarters, but with the valuations of US tech giants generally rising significantly, they face the risk of larger-scale sell-offs due to disappointing performance, prompting some investors to take profits. According to reports, the overall expected P/E ratio of a basket of AI-related stocks tracked by Goldman Sachs is around 32x, much higher than the S&P 500 index's 21x.

Zehrid Osmani, a fund manager at Martin Currie, stated that in the coming years, if AI companies, excluding NVIDIA, "cannot show more enthusiasm for profit upgrades and demonstrate significant gains from AI opportunities, their stock prices may face downward pressure." He emphasized, "Our view is to hold onto AI tech companies that clearly have the ability to monetize, as well as companies with performance guidance upgrades."

However, institutional investors generally believe that the boost to profit growth from artificial intelligence, coupled with the upcoming rate cut cycle and a robust economy, will continue to support the stock market.

Dan Kim, portfolio manager and senior investment analyst at Saturna Capital, said: "We are witnessing a surge in innovation that could significantly drive the economy higher than market expectations in the coming years."

Global companies are vigorously deploying AI in an unstoppable trend

Meanwhile, top Wall Street investment banks continue to maintain a bullish view on NVIDIA, known as the "AI leader," with expectations for the stock price trend over the next 12 months. It is widely believed that global demand for NVIDIA's H100/H200 AI GPUs remains very strong, and the next-generation AI GPU based on the Blackwell architecture is expected to bring significant revenue contributions. The "CUDA software-hardware collaborative platform + high-performance AI GPU" collectively forms NVIDIA's incredibly strong moat.

According to a report from the well-known research firm IDC, the total global investment in AI IT systems covering software, hardware, and other related services centered around artificial intelligence is only about $132.49 billion in 2022, but is expected to grow to $512.42 billion by 2027, with a high compound annual growth rate (CAGR) of 31.1%, focusing extensively on generative AI similar to ChatGPT.

IDC's latest survey shows that by 2027, 45% of enterprises are expected to master and use generative AI tools to jointly develop digital products and services, aiming to double their revenue scale compared to competitors. IDC also predicts that the global generative AI market will have a CAGR of 85.7%, with the global market size approaching $150 billion by 2027 All of this means that NVIDIA, which dominates the AI core infrastructure field, is expected to continue to benefit from this unprecedented AI boom in the coming years.

Looking at a longer time frame, NVIDIA's stock price has soared by over 1000% since October 2022, and last week it briefly became the world's highest market cap listed company, claiming the title of "global stock king" for the first time. After this 1000% surge in the AI frenzy, global funds may shift from enthusiastic irrational chasing to rational thinking, which may imply a short-term downward adjustment or consolidation of NVIDIA's stock price, but it is difficult to change NVIDIA's stock price "long bull trend" in the AI era.

Wall Street analysts bullish on NVIDIA's stock price have emphasized that NVIDIA will continue to rise, possibly hitting $150 or even $200 within the year—meaning NVIDIA's market value will surpass the $5 trillion mark. Since the beginning of this year, the average target price set by Wall Street analysts has also lagged far behind NVIDIA's stock price surge, forcing all analysts covering NVIDIA's stock to continuously raise their target prices.

On Monday Eastern Time, top Wall Street investment bank Morgan Stanley significantly raised NVIDIA's performance expectations and target stock price, believing that, driven by unparalleled demand, NVIDIA's performance data for at least this year will be "strong." Morgan Stanley, after its latest research, has raised NVIDIA's target stock price from $116 to $144 within 12 months, and maintains its "overweight" rating on NVIDIA.

Recently, well-known Wall Street investment firm Rosenblatt released a heavyweight research report, with the core content being: based on the potential prosperity expectations of NVIDIA's software business core around CUDA, even though the stock price of AI chip leader NVIDIA has surged in a year, the stock price of this chip giant will continue to rise in the next 12 months. In addition to the huge GPU hardware revenue brought by NVIDIA's AI GPU tightly bound to CUDA, and the revenue generated by large-scale applications of CUDA in the enterprise sector, the software business derived from CUDA is also an engine for NVIDIA to achieve huge revenue through CUDA.

The above views are from chip industry analyst Hans Mosesmann at Rosenblatt, who in this research report has significantly raised the firm's target stock price for NVIDIA from $140 to an astonishing $200 per share within the next 12 months, ranking it as the highest target price on Wall Street for NVIDIA.