US stocks rose more than 20 percent for the second year in a row.

The U.S. S&P 500 index rose more than 20 percent for the second year in a row as investors’ enthusiasm for artificial intelligence led to big gains in megacap tech stocks.

Despite a sell-off in December, the basket of blue-chip stocks is up 23.3 percent in 2024, following a 24.2 percent gain last year, marking its best two-year run this century. The index has posted annual gains of more than 20 percent four times in the past six years.

The rally was led by large tech stocks exposed to AI. Shares in chipmaker Nvidia are up 172 percent year-to-date, while Meta, a big bet on new technology, is up 65 percent.

The performance of the S&P 500 stood in contrast to European markets, with the Stoxx 600 up 6 percent and the FTSE 100 up 5.7 percent. MSCI’s index of Asia Pacific shares rose 7.6 percent.

“The US (market) has not been very special,” said Michael Metcalfe, head of macro strategy at State Global Markets.

Wall Street stocks rose for the first time on Federal Reserve interest rates as the coronavirus pandemic and lackluster economic data reassured investors that the US is headed for a soft landing. Expectations of Trump’s second-term tax cuts and deregulation have led to strong gains in recent months.

Bank of America strategist Benjamin Bowler said Trump’s “laissez-faire economics, tax cuts and deregulation” combined with the “AI revolution” means the rally could continue into 2025. The US stock market, he said, “may just be the beginning.”

But Chris Jeffrey, head of macro for legal and general investment management at the $1.4tn-in-assets fund, said: “There are a few red flags that make us a bit wary.”

The difference in price-to-earnings ratios between U.S. and European stocks is justified “only if you believe the last 10 years[of tech-driven U.S. earnings growth]can continue and continue for a long time,” he added.

Investors had to back down expectations of depreciation in the coming year. With inflation still above target, forecasts that interest rates will be cut in 2025 led to the S&P 500’s worst session in four months in early December. That dampened investor enthusiasm after Trump’s election victory in November and helped send the index down 2.5 percent in December.

Megacap tech stocks, including the so-called “Fabulous Seven” — Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla — were once again the dominant force in the US market.

Bulls say the big tech revenue growth and AI’s potential to boost productivity are valid for valuations.

Mike Zygmont, co-head of trading and research at Wisdom Investment Group, said that barring a decline in revenue, the Magnificent Seven will continue to be highly popular in 2025 with the high volume of revenue they did in the past. “Investors just want them,” he said.

But their growth has led bear analysts to draw comparisons to today’s bull market and the tech bubble that burst spectacularly at the turn of the millennium.

In contrast to gains from the technology sector, industrial materials companies are among the best-performing Chinese stocks in the S&P 500 in 2024, failing to meet the appetite of investors hurt by China’s struggling economy and fears of a U.S. recession.

Volatility boots briefly interrupted the S&P 500’s otherwise steady climb. Stocks in addition to the fall in December It is sold very well In early August, it was able to fall beyond the technology sector.

Still, wealth managers’ long-term exposure to the S&P 500 rose to the highest level in more than 20 years in early December, according to Bank of America’s monthly survey of global fund managers, indicating “overwhelming sentiment.” Meanwhile, retail investors’ enthusiasm for stock market gains next year was not high, Deutsche Bank reported.

However, Citi’s closely watched U.S. Economic Vitality Index has slipped in recent weeks, indicating that economic growth is weaker than expected. Some analysts say slow growth in the amount of money circulating in the US economy, high Treasury yields and a strong dollar point to a recession by 2025.

They have investors Sold technology stocks In recent days, the Russell 2000 index of small-cap stocks has fallen further from its November high. The equal-weight S&P 500, which gives each component a 0.2 percent weight, has shed 6.6 percent in the past month.

The level of concentration in big tech remains a “sick business” for investment funds that can only hold any single stock, said Nomura strategist Charlie McElligott.

Investors “can’t have enough ownership,” he added.