THE S&P 500, a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States, is enjoying a strong year in 2024, driven by the outstanding performance of chipmaker Nvidia. The top video graphics card provider has significantly boosted the index, contributing 33.73 percent of its returns this year with its soaring stock price.
Nvidia’s significant contribution to the S&P 500’s growth in 2024 highlights its financial prowess and role as a key driver of innovation in the tech sector. The wide use of AI chatbots and demand for Nvidia GPUs have fueled the company’s astounding success. The broad accessibility of Nvidia’s platform and its extensive customer base have also solidified its position in the chip market.
As of June 13, 2024, Nvidia’s outsized impact on the S&P 500 was evident, with the company contributing 33 percent year-to-date (YTD) to the index’s total returns. This impressive performance has been fueled by a staggering 162 percent increase in Nvidia’s share price YTD. The escalated demand for its AI chips is a major cause for the rise of its share prices.
Microsoft ranks second, contributing 8.47 percent year-to-date returns to the S&P 500. Its remarkable performance stems from substantial investments in AI startups such as OpenAI and Wayve. Additionally, the company’s engagement in AI development and cloud services has driven substantial profits, with revenue climbing 17 percent year over year as of Q2 2024.
Alphabet trails Microsoft, contributing 6.62 percent to the index’s YTD returns. Meta and Apple follow closely, contributing 5.73 percent and 5.53 percent to the index’s YTD returns, respectively.
All these top five stocks drive about 60 percent of the S&P 500’s returns, hinting that AI development could be the most profitable sector now and in the forthcoming years.
Current standings
Nvidia dominates the AI chip market, capturing between 70 percent and 95 percent market share, with its revenue tripling each quarter recently. This surge has propelled its stock by 150 percent in the first half of 2024.
The company’s momentum surged following the launch of ChatGPT in November 2022, which thrust generative AI into the spotlight and inspired unprecedented demand for AI hardware.
Nvidia intends to maintain its lead in the AI chip game, expressing its confidence in maintaining its market position, even as rivals AMD and Intel work hard to throw it off.
“Nvidia clearly intends to keep its dominance for as long as possible, and in the current generation, there is nothing really on the horizon to challenge that,” said Richard Windsor, founder of Radio Free Mobile, a research company focusing on the digital and mobile ecosystem.
The company has realigned its focus from gaming to data centers, investing in expanding into new markets. Notably, Nvidia is also collaborating with a wide range of computer manufacturers and cloud providers to bolster its presence in the industrial robotics sector. The company’s ability to deliver substantial growth may propel the stock, but there is also a chance that the near-term demand is already reflected in the current share price, which could constrain the stock’s potential gains by the end of the year.
Wall Street analysts hint that investors may eventually become disappointed if Nvidia’s future financial results either beat estimates by a more modest amount or miss them entirely. So far, Nvidia has beaten revenue and earnings estimates by at least 6 percent and 10 percent in four straight quarters, underscoring the firm’s impressive trajectory gains.
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