Ann Wang/Reuters IMAGEAnn Wang/Reuters IMAGE

The broader market looks less rosy. Nvidia CEO Jensen Huang present NVIDIA Blackwell platform at an event ahead of the COMPUTEX forum, in Taipei, Taiwan June 2, 2024. A version of this story first appeared in CNN Business’ Before the Bell newsletter.

Nvidia’s eye-popping gains this year have helped propel the stock market to repeated record highs. But beneath the surface, the rally is looking uneven.

The S&P 500 index has jumped nearly 15% so far in 2024, notching 31 new peaks along the way. Much of those returns have been driven by the mega-cap Magnificent Seven stocks, which have seen explosive growth as investors pour cash into the burgeoning artificial intelligence boom.

But beyond that cohort of tech stocks, the market is looking less rosy. The S&P 500 equal-weighted index, which gives every stock the same weighting, has risen just 4% this year.

The information technology and communication services sectors of the benchmark index have gained roughly 29% and 24%, respectively. The S&P 500’s other sectors have notched single-digit gains, excluding real estate, which is lower for the year.

At the forefront of the market’s meteoric returns is Nvidia. The company briefly surpassed Microsoft this week as the largest public company the world. Nvidia shares are up 164% for the year.

The chipmaker’s stock has been on a tear for the last year and a half. Nvidia’s chips are unmatched in producing processors that power artificial intelligence systems, including for generative AI, the technology backing OpenAI’s ChatGPT, which can create text, images and other media.

Can Nvidia’s blockbuster gains continue, and what does its outsized market cap mean for the stock rally?

Before the Bell spoke with Christopher Barto, senior investment analyst at Fort Pitt Capital Group.

This interview has been edited for length and clarity.

Before the Bell: Are you worried that the stock market’s gains aren’t even across the board, and most of it is concentrated in the big tech Magnificent Seven stocks, especially Nvidia?

I don’t know if it’s necessarily worrisome. I think it’s interesting.

Coming out of first-quarter earnings, when you exclude the (Magnificent Seven earnings) numbers, growth was actually down 2% year-over-year. So, the majority of the market is struggling.

There are some bright spots. There are a lot of other semiconductor equipment companies, and there are other companies that are doing well that just aren’t at the market-cap weight that Nvidia is at, and we sort of look at those as presenting opportunities (to buy.)

Mortgage rates fall to their lowest level in almost three months

Mortgage rates fell this week to their lowest level since early April, taking some pressure off America’s unaffordable housing market, reports my colleague Bryan Mena.

The standard 30-year fixed-rate mortgage averaged 6.87% in the week ending June 20, mortgage financing giant Freddie Mac reported Thursday. That’s down from last week’s 6.95% average and marks the third consecutive weekly decline. Rates are down from a 2024 peak of 7.22%.

“Mortgage rates fell for the third straight week following signs of cooling inflation and market expectations of a future Federal Reserve rate cut,” said Sam Khater, Freddie Mac’s chief economist, in a release. “These lower mortgage rates coupled with the gradually improving housing supply bodes well for the housing market.”

Still, mortgage rates remain higher than anything seen in the decade before 2022, the year the Federal Reserve began to raise interest rates to combat inflation. Borrowing costs are poised to ease this year, but it may not be by much.

Earlier this month, Fed officials penciled in just one interest rate cut for this year, compared to the three they forecast in March. The Fed doesn’t directly set mortgage rates but its actions do influence them through the benchmark 10-year US Treasury yield, which moves in anticipation of the Fed’s policy moves. Economists don’t expect the average mortgage rate to fall below 6% this year.

Do you think Nvidia’s monster run will continue?

I do not have the answer to that. But I do think that if you want exposure to artificial intelligence and secular mega trends that you’re seeing, you’re going to want to own some of the mega-cap companies like the Googles and the Amazons and the Microsofts and the Metas, because if they’re the ones that are spending on the (graphics processing units that Nvidia makes) and the servers and all the data centers, they have the ability to essentially pull that capital spending at any second to increase their free cash flow.

(Much) of Nvidia’s revenue is coming from Meta, it’s coming from Google, it’s coming from Amazon. You’re seeing this shift in these companies trying to basically get ahead of AI demand, and those are the kinds of companies that could essentially afford Nvidia’s GPUs at scale like that. 

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