Strip Out AI and the S&P 500 Looks Very Different, Goldman Index Shows

Performance Comparison## The S&P 500 has gained 18.3% in six months, with a record high of 7,818.93, according to Google Finance data. In contrast, the ex-AI index, ticker SPXXAI, has gained 6.7% to 3,123.24, resulting in a gap of 11.6 percentage points. This disparity suggests that the benchmark's records are now heavily influenced by AI-linked stocks.## AI's Impact on the Market## Goldman Sachs built the ex-AI index in February to allow clients to hedge against AI exposure. The index excludes stocks deemed AI enablers, which account for approximately 45% of the S&P 500. The exclusion of these stocks has resulted in a lower performance for the ex-AI index, which sits 6.4% below its 52-week high.## The Role of Chip Stocks## The latest surge in the AI rally has been driven by chip stocks, including AMD, Marvell, Synopsys, and Cadence Design Systems, which have each gained 20% or more in about 20 trading days. However, not all power stocks are creating a new leg of the AI trade. According to Jan van Eck, CEO of VanEck, power producers and nuclear energy are the second stage of the AI trade, following the first stage of chip stocks. He notes that the group has lagged this year due to political concerns about data center growth. Nevertheless, a recent deal between Alphabet and Constellation Energy may signal a turning point for the group. The deal, which could mark the bottom for power producers, may also indicate that the dry spell for the AI 2.0 trade is nearing an end. A prediction market cited by Van Eck puts the odds of one approved nuclear plant at below 10% this year. When that happens, Van Eck predicts that the dry spell for the AI 2.0 trade will be over.