5 Large-Cap ETFs at the Forefront of the Market Rally This Year
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jun 12 2024
0mins
Should l Buy MSFT?
Source: Business Insider
- Wall Street Rally: Wall Street has seen a strong rally this year, with large-cap stocks leading the way due to strong earnings growth and the AI craze.
- Reasons for Outperformance: Large-cap stocks are outperforming due to better-than-expected earnings, the dominance of key technology companies, and benefits from the AI boom.
- ETFs in Focus: Highlighted ETFs include VanEck Vectors Semiconductor, Invesco S&P 500 Momentum, Gabelli Growth Innovators, Fidelity Blue Chip Growth, and MicroSectors FANG+ ETN.
- ETF Performance: These ETFs have shown significant gains this year, ranging from 23.4% to 46.1%, with each focusing on different sectors and investment strategies.
- Investment Appeal: Large-cap stocks offer stability, resilience to higher rates, inflation hedge, and are considered less risky, making them attractive to investors seeking safety and growth potential.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 407.780
Low
500.00
Averages
631.36
High
678.00
Current: 407.780
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company. The Company develops and supports software, services, devices, and solutions. The Company’s segments include Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services. This segment primarily comprises: Office Commercial, Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment consists of server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub; and Enterprise Services, including enterprise support services, industry solutions and Nuance professional services. The More Personal Computing segment primarily comprises Windows, Devices, Gaming, and search and news advertising.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Microsoft's Strong Performance: Microsoft reported adjusted earnings of $4.27 per share for its fiscal third quarter, with revenue hitting $82.89 billion, while Azure revenue surged 40%, indicating robust competitiveness in the cloud sector and sustained growth expectations.
- Google Cloud Revenue Surge: Alphabet's cloud revenue soared 63% to $20 billion, with backlog nearly doubling to $462 billion, reflecting strong demand for AI-driven products and further solidifying its market position.
- Amazon AWS Significant Growth: Amazon's AWS revenue rose 28% to $37.6 billion, marking its fastest growth rate since 2022, showcasing the company's appeal in the AI sector, although heavy investments may impact free cash flow.
- Increased Capital Expenditure Plans: Both Microsoft and Google have raised their capital expenditure plans for 2026, with Microsoft estimating around $190 billion and Google between $180 billion and $190 billion, demonstrating confidence in future growth prospects.
See More
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- Significant AI Growth: Microsoft's AI business reported a remarkable year-over-year growth of 123%, indicating a strong return on investment in artificial intelligence, which could lay the groundwork for future revenue increases.
- Increased Capex Forecast: The company raised its capital expenditure forecast for 2026 to $190 billion, up from $150 billion, reflecting a 25% increase that underscores confidence in future growth opportunities while also highlighting rising input costs.
- Cloud Growth Constraints: Despite Azure's impressive 40% growth rate, the actual growth may be limited due to insufficient computing capacity, suggesting that the company needs to enhance its infrastructure investments to meet market demand effectively.
- Decline in Traditional Revenue: Revenue from Xbox, Windows licenses, and devices declined during the quarter, indicating challenges in Microsoft's traditional business segments, which could impact overall financial performance and market confidence.
See More
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- Surging Memory Demand: Samsung's EVP Jaejune Kim stated that the surge in memory demand is prompting customers to pre-order chips for 2027, indicating that the supply-demand gap is expected to widen further, highlighting an increasingly tight market in the coming years.
- Rising Capital Expenditures: Alphabet reported a capital expenditure of $35.7 billion in Q1, primarily aimed at supporting AI opportunities, reflecting the urgency of investing in technical infrastructure, with projections indicating capex could exceed $1 trillion by next year.
- Growing Hardware Demand: Meta Platforms is extending the lifespan of aging servers due to an inability to acquire new ones, with an internal memo noting that hardware demand growth has exceeded expectations, particularly in critical server commodities like DRAM and HDDs, which are becoming binding constraints.
- Emerging Investment Opportunities: With strong earnings from major tech firms, Wall Street analysts believe investors will continue to chase perceived winners in the semiconductor and memory sectors, especially against the backdrop of rising prices for DRAM and NAND products, while demand for memory testing equipment is also on the rise.
See More
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- AWS Growth Acceleration: Amazon's Q1 revenue rose 17% year-over-year to $181.5 billion, with AWS cloud computing revenue growing 28% to $37.6 billion, marking the fastest growth rate in 15 quarters, indicating strong market demand and ongoing business expansion potential.
- Strong Demand Pipeline: AWS's backlog reached $364 billion at the end of the quarter, excluding the recently announced commitment of over $100 billion from Anthropic, suggesting a positive outlook for future growth and further solidifying Amazon's leadership in the cloud computing market.
- Surging Capital Expenditures: Amazon's capital expenditures totaled $44.2 billion in Q1, primarily driven by AI infrastructure investments, and although free cash flow dropped to $1.2 billion, management remains optimistic about long-term returns on these investments, which are expected to drive future business growth.
- Microsoft's Slowing Growth: Microsoft's Q3 revenue increased 18% year-over-year to $82.9 billion, with Azure cloud services revenue growing 40%, but the growth rate has plateaued, and the outlook for the next quarter suggests a slowdown to 39%-40%, indicating a competitive disadvantage compared to Amazon.
See More
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- Software Stocks Surge: Atlassian (TEAM) posted Q3 revenue of $1.79 billion, surpassing the consensus of $1.69 billion, leading to a stock price increase of over 20%, which not only boosted the software sector but also enhanced investor confidence in tech stocks.
- Oil Price Volatility: WTI crude oil prices fell more than 3% due to developments in the US-Iran agreement, temporarily easing inflation concerns and contributing to stock market gains, highlighting the energy market's influence on the overall economy.
- Weak Manufacturing Data: The April ISM manufacturing index remained unchanged at 52.7, below the expected 53.2, while the prices paid sub-index rose to a four-year high of 84.6, indicating increasing price pressures that could impact Federal Reserve policy decisions.
See More
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- Apple's Impressive Earnings: Apple's second-quarter revenue surged 17% to $111.2 billion, surpassing the $109.7 billion estimate, with strong guidance boosting investor confidence and suggesting further stock price increases ahead.
- Eli Lilly's Strong Performance: Eli Lilly's shares rose another 3% following a nearly 10% rally post-earnings, with a remarkable 56% year-over-year revenue increase to $19.8 billion, leading Jim Cramer to assert that selling the stock would be premature.
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See More
