The S&P 500’s second-quarter performance has been extraordinary, with the index up 16.3% over April and May, driven overwhelmingly by a 36.3% surge in technology stocks. Just a dozen companies produced 12.2 percentage points of those gains, according to data from Seaport Research Partners. The rally has been fueled by investor enthusiasm for artificial intelligence, even as the profits from AI remain largely unrealized.
But the Wall Street professionals who manage portfolios for a living find themselves in a bind, according to a report in the Journal. While some express unease at the market’s recent pace, they also predict further gains. “The AI train is moving forward,” one strategist at a major asset manager told the Journal. “You don’t necessarily want to try to stop it or sit on the sidelines.”
The source of that pressure is career risk. Missing out on the rally, even if it turns out to be a bubble, could cost a fund manager their job. As the Journal noted, individuals saving for retirement face only the “anticipated regret” of FOMO, but professionals face the concrete risk of losing their livelihood.
Stanley Druckenmiller, regarded as one of the greatest investors of all time, offered a cautionary tale. Speaking to a private group, he described his experience during the dot-com bubble while working for George Soros’s Quantum Fund. He correctly believed disaster was coming and bet against tech stocks near the end of 1999 — but too early. After suffering losses, he found himself unable to resist buying as competitors racked up gains.
“So like around March I could feel it coming. I just—I had to play. I couldn’t help myself. And three times the same week I pick up a—‘don’t do it. Don’t do it.’ Anyway, I pick up the phone finally. I think I missed the top by an hour. I bought $6 billion worth of tech stocks, and in six weeks I had left Soros and I had lost $3 billion in that one play,” Druckenmiller said.
Even as the rally continues, companies are raising enormous sums to fund AI infrastructure. Google parent Alphabet announced plans to raise $80 billion, a move that sent its stock down more than 2.5% in premarket trading Tuesday. Berkshire Hathaway agreed to buy $10 billion of the offering. Marvell Technology, a chip maker, saw its stock soar nearly a quarter in premarket trading after Nvidia CEO Jensen Huang said it could become the next trillion-dollar company thanks to AI hardware demand. Broadcom shares also rose, and Nvidia’s stock advanced more than 1%.
Hewlett Packard Enterprise shares surged after the server company reported “rampant compute demand” as customers adopt AI tools. STMicroelectronics raised its data-center revenue target, citing booming AI demand. The Journal noted that “Nvidia Inside” now carries more selling power than the “Intel Inside” campaign of the 1990s.
For diversified investors already exposed to the market, the message is: if today’s wonder stocks seem overcooked, the slow train is available — and nobody will fire you.