AI has powered the S&P 500 this year. Don’t expect this to change anytime soon, BlackRock says.

The AI ​​juggernaut that powered this year’s S&P 500 (^GSPC) rally is expected to continue boosting returns over the next six to 12 months, according to BlackRock analysts.

“There is still a case to be made for taking risks,” Wei Li, global chief investment strategist at BlackRock Investment Institute, said during a media roundtable on Tuesday.

Reasons Li and her team are bullish on stocks include companies’ massive capital expenditures on AI and rising demand for low-carbon energy. Investments in AI data centers are expected to increase by 60% to 100% annually in the coming years, Li said.

“If we add up all these cap-ex expenditures, we arrive at numbers rarely seen in history and comparable to the Industrial Revolution,” she said.

At the beginning of July, there was a record $6.15 trillion in money market funds, while the S&P 500 has posted 36 record highs this year.

In the first half of 2024, the S&P 500 rose 14.5%, with a handful of stocks leading the way. Notably, AI heavyweight Nvidia (NVDA) accounted for about a third of the S&P 500’s gains through the first six months of the year, while outperformance in large-cap tech’s quarterly results contributed to earnings growth in the S&P 500 over the past year. year.

However, BlackRock’s strategists don’t see the concentration of stock performance as a problem as megacaps have delivered gains. They expect that major technology companies will invest heavily in building AI and that chipmakers and energy and utility companies will continue to outperform.

“We think markets are likely to continue rewarding perceived AI winners over the next six to 12 months – regardless of where the longer-term transformation leads,” according to the asset management firm’s 2024 Midyear Global Outlook.

Investors should consider “taking risks, moving away from cash and really thinking about pockets of opportunity,” said Gargi Chaudhuri, chief investment and portfolio strategist for the Americas at BlackRock.

Such sectors include energy, healthcare and utilities – sectors that will benefit from the AI ​​boom.

The growing need to power everything from data centers to chip factories has pushed the S&P 500 Utilities ETF (XLU) up more than 8% year to date, compared to a loss of about 7% in 2023.

The strategists say risks that could slow or pause AI development and adoption include potential policy and regulatory challenges, rules on AI use, and supply bottlenecks amid growing demand for metals and minerals such as copper, aluminum and lithium.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X @ines_ferre.