On Thursday, the Nasdaq and S&P 500 finished at their highest levels in nine months.
According to statistics provided by BofA Global Research on Friday, investor enthusiasm for artificial intelligence has contributed to a record week of inflows into technology equities funds.
BofA reported $8.5 billion in weekly inflows into technology equities, citing data from EPFR. A total of $14.8 billion was invested in stocks last week, making it the most significant weekly inflow since February.
Nvidia, a manufacturer of graphics processing units, had its market capitalization jump beyond $1 trillion briefly as its stock price increased by 30% in just three trading sessions.
BofA analysts noted in a memo that investors are following a summertime trend of buying tech and stocks, referring to an artificial intelligence (AI) “bubble,” albeit they stressed that they remained negative due to the impact of increased interest rates causing liquidity to tighten.
Investors are returning to large-cap stocks with high margins and P/E ratios because they are “bored of waiting for rates to cause a recession,” as the article puts it.
BofA estimates that the year-to-date gain of the S&P 500 is 10%, with 8.8% of the return coming from only seven stocks: Apple, Google parent Alphabet, Microsoft, Amazon, Meta, Nvidia, and Tesla.
Some investors are worried because a surge led by a small number of firms casts doubt on the strength of the market as a whole and threatens to spark instability if investors sell their mega-cap holdings.
While gold funds had withdrawals of $200 million, cash funds witnessed inflows of $11.3 billion, making this the sixth consecutive week of inflows, according to BofA.
Bank of America recommended selling the Nasdaq 100 in anticipation of a surprise stimulus from China this month while buying the Hong Kong Hang Seng Tech Index (which contains many sizeable Chinese technology companies).
