▲ New York Stock Exchange
The U.S. stock market bull market, driven by the artificial intelligence (AI) boom, marked its 4th anniversary on the 12th (local time).
As U.S. Treasury yields soared to their highest levels in about 20 years, Wall Street views are divided on whether the rally will extend into a fifth year.
The S&P 500 index closed at 7,807.20 on this day.
It has surged 118.3% since October 12, 2022, when it hit its bear market closing low of 3,577.03.
Over the same period, the tech-heavy Nasdaq Composite Index also rose 161.5%, moving from 10,417.10 to 27,245.90.
According to CNBC, MarketWatch, and other outlets, the rally was led by AI-related stocks.
Technology stocks account for about 40% of the S&P 500 index, and since OpenAI launched ChatGPT at the end of 2022, so-called picks-and-shovels stocks necessary for building AI infrastructure have skyrocketed.
Nvidia stands out by far.
Its market capitalization has ballooned from $280 billion (approx. 383 trillion won) four years ago to $5.464 trillion (approx. 7,422 trillion won) currently.
It has grown about 19.5-fold over four years.
Micron Technology also surpassed a $1 trillion market cap for the first time last May and is currently recording $1.119 trillion (approx. 1,520 trillion won).
During the four years of this bull market, seven semiconductor companies including these two, Broadcom, TSMC, Samsung Electronics, SK Hynix, and AMD, crossed the $1 trillion market cap threshold for the first time.
Meta, Tesla, and Amazon succeeded in re-entering the $1 trillion club.
As the bull market enters its fifth year, rising interest rates are emerging as a burden, with the U.S. 10-year Treasury yield reaching 5.237% and the 30-year yield hitting 5.602%.
Jordan Rizzuto, Chief Investment Officer (CIO) at Gamma Road Capital, pointed out that rising interest rates pressure stock valuations and increase corporate borrowing costs.
Because higher interest rates reduce the present value of future earnings, they are particularly disadvantageous to the AI rally, which relies on high growth expectations.
He stated, "If bonds offer similar yields with much lower volatility, pension funds and others have a greater incentive to shift funds from stocks to bonds."
Concerns are also growing as the number of advancing stocks has narrowed to a small number of large-cap names.
Last September, 75% of S&P 500 stocks declined, prompting Deutsche Bank strategist Parag Thatte to assess that tech concentration is excessive and the reward-to-risk ratio is no longer favorable.
Ari Wald of Oppenheimer analyzed that the current bull market is the 6th longest out of 24 bull markets since 1932, noting that historical cases show the median time remaining until a peak is 13 months.
Optimism is also substantial.
According to Carson Investment Research, bull markets that exceeded four years since 1950 have risen by an average of nearly 19% in their fifth year.
Ryan Detrick, Chief Market Strategist at Carson, said, "There has been only one time over 50 years ago that a bull market ended in its fifth year," adding, "This bull market is the third best start on record based on the 4-year mark."
(Photo: Getty Images)
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