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The State of AI: Q2 2024 Report

2023 brought artificial intelligence (AI) to the forefront of our everyday lives in a frenzy. Everyone from students to parents to executives began using AI both knowingly and unknowingly while at the same time trying to understand it and discern human creation from AI generation. That pattern has continued at an accelerated pace this year. AI adoption of respondents to the McKinsey Global Survey on AI1 jumped from 55% in 2023 to 72% earlier this year.

In the first half of this year, the stock market has continued its stride from 2023 with a 14.79% return YTD2 at the end of Q2. This high performance was carried by the Magnificent Seven, made up of large-cap tech giants Nvidia, Meta, Tesla, Google, Microsoft, Amazon, and Apple, which closed out Q2 with a 38.15% return YTD2. The remaining 493 companies on the S&P 500 were collectively down 1%3 last quarter.

There has, however, been fairly significant divergence in the so-called Magnificent Seven, with Tesla falling behind and Nvidia pulling ahead. Tesla may not even be considered a member of the club anymore, with Broadcom, a semiconductor manufacturing company, taking its seat. With Broadcom replacing Tesla, the new Magnificent Seven holds a 29% combined market weight4 of the index.

Like the stock market, venture capital funding has also been dominated by AI this year. Total U.S. venture capital funding surpassed $55 billion in Q2, a 47% increase over Q15. This growth was largely driven by investments in AI startups, which drew 28% of the global total in Q2, a 32% QoQ increase6. This marks AI’s highest share in history, with the fintech sector showing the largest growth6 within the industry. Average deal size has also been increasing over time6. For example, last quarter’s AI investment dominance was driven by Elon Musk’s xAI, which raised over $6 million5 last quarter.

More of the biggest names in AI have continued releasing new and updated products7 this year. Nvidia released the next generation of GPUs, Blackwell GPUs, while Apple entered the generative AI fray with its Apple Intelligence suite4. OpenAI released ChatGPT-4o as Anthropic released its own upgraded competitor, Claude 3.5 Sonnet. Meta, Mistral, and Salesforce released new LLMs as well. Google has debuted a new AI assistant and released upgraded generative AI models for its chatbot Gemini and an image generator. Adobe has launched its own suite of generative AI tools such as GenStudio. Microsoft unveiled an AI laptop. And we’re only halfway through the year.

From researching pre-IPO startups to tracking product launches and market conditions across the tech industry, the managers of TrueShares’ Technology, AI, and Deep Learning ETF (LRNZ) have always used fundamentals to select the 20 to 30 companies in its portfolio. As the market continues to be carried by mega-cap tech companies riding the AI wave, fundamentals will play a foundational role in sorting through the noise and capitalizing on this rapid growth industry through the rest of 2024 and beyond.

  1. https://www.mckinsey.com/capabilities/quantumblack/our-insights/the-state-of-ai 
  2. https://portfolioslab.com/portfolio/wv0qmb8bejl7tta5wek1cdk5 
  3. https://www.advisorperspectives.com/commentaries/2024/07/03/inflation-slows-ai-soars-q2s-key-themes 
  4. https://www.morningstar.com/markets/what-broadening-rally-ai-stocks-dominate-again-q2 
  5. https://economictimes.indiatimes.com/tech/technology/ai-deals-lift-us-venture-capital-funding-to-highest-level-in-two-years-data-shows/articleshow/111447031.cms
  6. https://www.cbinsights.com/research/report/venture-trends-q2-2024/ 
  7. https://qz.com/2024-new-ai-apple-intelligence-chatgpt-google-gemini-1851564165
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