As investors, the key to successful stock picking lies in identifying sectors that are thriving and showing promising growth. It is crucial to gauge the health and potential of industries before making investment decisions. The latter half of 2024 unveils a landscape where certain sectors are poised to assert their dominance, providing lucrative opportunities for profit.
Amidst the intricate web of industries, the ones set to lead in the coming months are deeply intertwined with significant macro trends. The omnipresence of artificial intelligence and the surging consumer spending in the United States are pivotal forces shaping the investment arena. Moreover, predictions hint at a possible downtrend in interest rates by up to 0.75 percentage points within the year. In light of these macro trends, the spotlight falls on sectors projected to reign supreme in the latter part of 2024.
Revolutionizing Data Centers
The widespread penetration of AI is reshaping industries at an unprecedented pace. An estimate cited by Forbes indicates a staggering growth trajectory for the global artificial intelligence market, with a projected compound annual growth rate (CAGR) of 37.3% from 2023 to 2030. This meteoric rise is expected to escalate the sector’s revenues to reach $1.8 trillion by 2030.
This exponential advancement bodes well for the data center industry. The demanding nature of training and deploying AI necessitates extensive data storage and computational power, services efficiently provided by data centers. Unsurprisingly, the industry has experienced a rapid surge in rental costs, with rates soaring by 18.6% last year after a 14.5% increase in 2022. As AI continues to ascend, the demand for data centers is set to explode in 2024, propelling rental rates further upwards.
Leading the charge towards lucrative gains are industry giants such as Digital Realty (NYSE:DLR) and Equinix (NASDAQ:EQIX).
Cloud Infrastructure Providers: Riding the AI Wave
The fourth quarter of the previous year witnessed an impressive 18.5% surge in spending on computer and storage infrastructure for cloud deployment, driven predominantly by the AI boom. This heightened expenditure is a significant boon for cloud infrastructure providers, including Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), and Salesforce (NYSE:CRM).
The escalating trend of increased spending on cloud services is poised to reach new heights in 2024, fueled by the proliferation of AI. Forecasts from Statista project a substantial leap in global end-user expenditure on public cloud services, expected to surge to $678.79 billion this year from $563.59 billion in 2023.
Automakers: Driving Towards Success
On March 13, Morgan Stanley raised its rating on the automotive sector from “in-line” to “attractive,” anticipating numerous automakers to profit from robust demand for gasoline-powered vehicles and reduced capital expenditures. An additional positive development is General Motors (NYSE:GM) augmenting its quarterly dividend and receiving a vote of confidence from esteemed investor David Tepper, who acquired 265,000 shares in Q4 2023.
An upward trajectory is already evident in the shares of leading automakers such as GM and Toyota (NYSE:TM). GM stocks have climbed 25% in 2024, while Toyota boasts a 33% surge this year, signifying considerable momentum and investor interest. Moreover, with the anticipation of lower interest rates in the latter half of 2024, automakers are poised to reap further benefits.
As the financial landscape of 2024 unfolds, keeping an eye on these burgeoning sectors promises to unearth compelling investment prospects in the dynamic world of finance.
