Analyst Andrew Percoco said this week, “We believe we are at the early stages of a multi-decade energy transition investment cycle that will require significant capital investment in gas power, renewables, and grid expansion/enhancement. GEV, in our view, is the purest way to gain exposure to all three of these investment opportunities,” Wall Street ended July on a high note, turning a tough month into a win. The S&P 500 had its best daily performance since late February, jumping 1.6% on Wednesday. This rise erased the index’s losses for the month, leading to a 1.1% gain for July. The Nasdaq Composite also did well, increasing by 2.6%.
This boost was largely due to impressive results from Advanced Micro Devices (AMD), which reported better-than-expected second-quarter earnings and revenue, pushing its stock up 4.4%. Nvidia, a key player in artificial intelligence, rode this wave, with its stock soaring 12.8%, marking its largest single-day increase in six months.
Beyond the major stock indices, a significant trend appeared in July: a shift from large-cap tech stocks to smaller, previously underperforming companies. The Russell 2000, representing small-cap stocks, saw a remarkable 10.1% rise in July, its best monthly performance since December. Bank of America analysts predict this “pain trade” trend will continue as investors turn to undervalued smaller companies. This shift shows a growing focus on the actual revenue generation of AI investments, moving past the initial hype.
On the analyst side, Morgan Stanley upgraded GE Vernova to overweight from equal weight, reflecting a broader trend towards investments in energy transition. Analyst Andrew Percoco highlighted the early stages of a multi-decade investment cycle in gas power, renewables, and grid expansion, positioning GE Vernova as a key beneficiary of these large capital investments. This focus on cyclical stocks, which are tied to the economic cycle, suggests a positive outlook for sectors set to benefit from long-term infrastructure and energy investments.
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