Investors' enthusiasm for artificial intelligence (AI) overshadowed concerns about the impact of the central bank's high interest rate, making the Magnificent Seven (“Mag7”) synonymous with this bull market, driving the Nasdaq 100 index, which mainly focuses on technology stocks, to record the best performance year in more than 10 years.

As of press release, the Nasdaq 100 index rose slightly by 0.2% during the day, rising 51% this year. The last time it reached 50% was in 2009. Among the constituent stocks, the most outstanding performer was Nvidia, the “AI shovel seller”. The increase during the year reached 230%, and this achievement$S&P 500 Index (.SPX.US)$It also ranked first.

It should be pointed out that at the beginning of the year, the concept of the “Big Seven” did not yet appear. In the middle of the year, the wave of artificial intelligence triggered by the chatbot ChatGPT became more and more popular, and only then did Nvidia, which provides the foundation of computing power, push Nvidia, which provides a foundation of computing power, to the top of the global market capitalization rankings.

There is still debate about whether Nvidia stock is too expensive or too cheap, but one thing is certain: Wall Street analysts all believe that Nvidia's profit has not yet peaked, and the company expects to generate about 48 billion US dollars in profit over the next 12 months, far higher than the 10 billion US dollar forecast at the beginning of the year.

According to calculations, Nvidia's contribution to the increase in the Nasdaq 100 Index was as high as 14.2%, Microsoft and Apple were around 12%, Amazon and Meta exceeded 8%, and Google and$Tesla (TSLA.US)$It is close to 7% and 6%, respectively.

The data also showed that thanks to Mag7's impressive performance, their overall weight in the S&P 500 index rose to a record 29% in November.

According to media analysis, investors may believe that these 7 companies have huge business scale and deep financial strength, and that they are the most capable of harnessing the potential of AI. However, the valuation of the Nasdaq 100 index is still very high. The price-earnings ratio of the constituent stocks for the next 12 months is expected to be 25 times, far higher than the average of 19 times over the past 20 years.

In addition to this, although the high yield of US Treasury bonds during the year had some brief impact on the Nasdaq 100 index, the threat posed by the whole year was not as great as many people had imagined, and there was even a sharp upward trend between March and July.

In particular, beginning in November, the Federal Reserve showed signs of ending interest rate hikes. After US bond yields fell markedly, the Nasdaq 100 Index seemed to have been freed from restraint, hitting new highs in the new year and in history.

edit/emily