This year, AI propelled the S&P 500. BlackRock thinks that won't change soon.  

BlackRock analysts predict that the AI-driven S&P 500 (^GSPC) surge will continue to drive returns for the next 6-12 months. Wei Li, global head investment strategist at BlackRock Investment Institute, told a media roundtable on Tuesday that risk is still justified.  

Companies' massive AI spending and rising demand for low-carbon energy make Li and her colleagues positive on US shares. Li expects AI data center investments to climb 60%-100% annually in the next years. "When we add up all this capex spend we get to numbers rarely seen in history comparable to the Industrial Revolution," stated.  

The broad-based index increased about 15% in the first half of 2024, led by a few businesses. AI giant Nvidia (NVDA) accounted for over one-third of the S&P 500's increase in the first six months, while large-cap tech's quarterly outperformance has boosted the index's earnings growth year-over-year.  

Given megacaps' profit success, BlackRock strategists don't see equity performance concentration as a problem. They expect huge tech businesses investing heavily in AI, semiconductor makers, and energy and utility suppliers to perform well.  

“We think markets are likely to keep rewarding perceived AI winners in the next six to 12 months – regardless of where the transformation leads longer term,” wrote the asset management firm's 2024 Midyear Global Outlook.  

BlackRock Investment Institute head investment and portfolio strategist for the Americas Gargi Chaudhuri advised investors to “lean into risk, stepping away from cash, and really thinking of pockets where there are opportunities.”  

Energy, Health Care, Industrials, Materials, and Utilities will gain from AI. The S&P 500 Utilities ETF (XLU) is up more than 8% year-to-date, compared to a 7% loss in 2023, as data centers and chip manufacturing plants require more power.  

The strategists think policy and laws, AI guidelines, and supply constraints due to rising demand for metals and minerals like copper, aluminum, and lithium might hinder or disrupt AI's build-out and adoption.  

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