When it comes to investing in stocks, the key lies in discerning the thriving sectors. Imagine pouring your resources into a deserted restaurant when hardly anyone is dining out – disastrous, right? Therefore, conducting extensive research on the industries primed to dominate the latter half of 2024 before selecting your stocks for the year is highly recommended.
In determining the sectors destined to outshine in the short-to-medium term, one must factor in the influence of robust macro trends. Think of artificial intelligence’s pervasive reach and the surging consumer spending in the United States as dominant macro trends. Despite their recent surge, predictions suggest a likely decrease of at least 0.75 percentage points in interest rates this year. These macro trends were pivotal in singling out the industries anticipated to reign supreme in the latter half of 2024.
The Data Center Renaissance
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The proliferation of AI is swift and extensive. According to Forbes, “The global artificial intelligence market is projected to expand at a compound annual growth rate of 37.3% from 2023 to 2030,” reaching revenues of $1.8 trillion by the end of the decade.
This boom spells fortune for the data center industry. The training and delivery of AI necessitate copious data storage and computing capabilities, both of which data centers provide.
The escalating growth of AI, coupled with data centers’ pivotal role in empowering AI, has led to a rapid surge in data center rental costs. Last year, the average rental rate skyrocketed by 18.6%, following a 14.5% increase in 2022. With the usage of AI still ascending steeply, the demand for data centers is poised to surge in 2024, propelling rental costs once more.
Key beneficiaries among data center operators poised to reap immense rewards include Digital Realty (NYSE:DLR) and Equinix (NASDAQ:EQIX).
Cloud Infrastructure Providers: Riding the Digital Wave
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The expenditure on computer and storage infrastructure for cloud deployment surged by a robust 18.5% in the final quarter of last year – AI being the primary driving force behind this escalation.
The uptick in spending on cloud computing and storage tools bodes well for cloud infrastructure providers like Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), and Salesforce (NYSE:CRM).
The trend of heightened expenditure on cloud services is set to intensify this year with the proliferation of AI. Statista projects a leap in global end-user spending on public cloud services from $563.59 billion in 2023 to a massive $678.79 billion this year.
The Automotive Resurgence
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On March 13, Morgan Stanley upgraded its rating on the automotive sector from “in-line” to “attractive.” The bank anticipates numerous automakers benefiting from robust demand for gasoline-powered vehicles and reduced capital expenditure.
The decision by General Motors (NYSE:GM) to up its quarterly dividend from 9 cents to 12 cents has invigorated my optimism for the sector. My upbeat mood is further bolstered by renowned investor David Tepper’s acquisition of 265,000 shares of GM stock in Q4 2023.
Significantly, the shares of GM and Toyota (NYSE:TM) – the two leading automakers in the U.S. – boast substantial momentum. GM stock has surged by 25% thus far in 2024, while Toyota has notched an impressive 33% gain year-to-date.
The automotive sector is also poised to benefit from lower interest rates in the latter half of 2024.
On the date of publication, Larry Ramer held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer, having researched and reported on U.S. stocks for 15 years, has been an integral part of The Fly and Israel’s premier business newspaper, Globes. Larry commenced contributing columns to InvestorPlace in 2015, showcasing highly successful, contrarian picks such as SMCI, INTC, and MGM. He can be reached on Stocktwits at @larryramer.
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