Key takeaways

  • Since Nvidia announced its massive earnings surge in May 2023, the semiconductor industry has dominated the tech sector and the overall US stock market.
  • The AI tide isn’t lifting all boats. Software stocks continue to lag, as the market remains cautious about potential disruption.
  • Despite share price volatility, private-market leaders like OpenAI and Anthropic have seen valuations soar.

The start of the artificial intelligence boom is usually traced to the launch of ChatGPT 3.5 in November 2022. But for investors, the big bang might be seen as May 24, 2023, when Nvidia NVDA announced an earnings surge and outlook, driven by massive AI demand, that completely blew away expectations. That trend has continued over the last three years and up through this most recent week.

While technology stocks have been major drivers of stock market returns for years, leadership among US equities has been dramatically remade by the AI boom. What began with semiconductor stocks three years ago has swept up hardware and other technology infrastructure names. Along the way, industrials and utilities have joined in with huge rallies. At the same time, investors are wary of potential losers in the AI revolution, most notably software stocks.

AI revenues explode

In May 2023, it was clear that AI was remaking the landscape, but the scale wasn’t yet visible. After Nvidia reported earnings, Morningstar and Wall Street significantly revised their outlooks for the company’s nascent AI chip business. Morningstar raised its five-year annual growth rate forecast for Nvidia’s data center segment revenue to 30% from 19%. Its actual average growth rate over the last three years: 142%.

Morningstar senior equity analyst Brian Colello says one clear way to see the exponential growth has been in accelerator revenues. Accelerators are graphics processing unit chips from Nvidia and Advanced Micro Devices AMD, as well as the “XPUs” designed by Broadcom AVGO, used by Google and others.

Nvidia has accumulated billions in revenue for its powerful chips. The firm’s accelerator revenue increased to $60.4 billion in the latest March quarter, up from just $3.4 billion three years ago—a 1,600% increase. On Wednesday, Nvidia announced first-quarter revenue of $81.6 billion, far above consensus expectations of $78.0 billion. That was largely driven by data center revenue of $75.2 billion, up 92% year over year.

“There’s no slowdown in demand for Nvidia’s AI gear, and the company is doing all it can to expand its supply chain to meet the insatiable demand associated with large language models and agentic AI,” wrote Colello in an analyst note about the firm’s latest earnings call. “Nvidia’s revenue growth is broad-based across customers, and profits remain stellar.”

Nvidia’s momentum shows no signs of slowing, with accelerator revenue projected to reach over $84.5 billion by the end of this year. That would be a 65% increase from the $51.3 billion recorded in December 2025.

As demand for compute has grown, other chipmakers have started to benefit. Broadcom, the second-largest chip supplier behind Nvidia, has seen accelerator revenue jump 840.2% between the March 2023 and March 2026 quarters. The company recently announced a multi-year custom XPU deal with Meta Platforms META, and it is expected to ramp up its partnerships with Anthropic and OpenAI this year. Broadcom’s accelerator revenue is projected to reach $18.3 billion by the end of the year, a 210% increase from the end of 2025.

Meanwhile, AMD has seen accelerator revenue rise 289% from its March 2023 quarter to March 2026. The chipmaker recently announced its 2026 first-quarter revenue was up 38% year over year. “AMD reported a blowout quarter thanks to robust server processor demand used in agentic AI,” wrote Colello in an analyst note published shortly after the earnings call. “The highlight was AMD doubling its forecast for the server CPU market versus its forecast just six months ago.”

Hardware stocks join the party

More recently, the infrastructure buildout has led to explosive growth in revenues for memory stocks, such as SanDisk SNDK and Western Digital WDC, as well as networking companies like Arista Networks ANET and Cisco Systems CSCO. For Arista and Cisco, “The ramp has been slightly delayed from the GPU ramp, but has caught fire in the past two years,” says William Kerwin, senior equity analyst at Morningstar.

The rising tide isn’t lifting all boats

Against this backdrop, the Morningstar US Semiconductors Index has soared in the last three years, posting a 423.9% return since May 2023, far outpacing the overall Morningstar US Market Index’s return of 85.6% over the last three years.

However, software companies have continued to stumble behind the rest of the pack. Returns for the software application industry, which includes Salesforce CRM and Adobe ADBE, are up just 17.6% since May 2023. The software infrastructure industry, which includes names like Microsoft MSFT and Palantir PLTR, has been up 82.5% over the last three years

As investor fears grow that AI could disrupt or entirely replace the software industry, these stocks continue to tumble—a reminder that the AI boom hasn’t lifted all parts of the tech sector equally.

That’s evident in the tech sector’s industry market caps. The semiconductor industry’s market cap has grown more than fourfold since the AI boom began, climbing to $9.4 trillion in April 2026 from $2.2 trillion in May 2023. Even as the AI investment has broadened beyond semiconductors, the industry has continued to expand, with its market cap up 13% since October 2025.

Meanwhile, the software application industry tells a different story. The industry’s market cap slid to $1.3 trillion in April 2026 from $1.8 trillion in October 2025, a 26% decline in six months.

Fueling returns and stock market concentration

The AI trade has been the dominant driver of returns in investor portfolios. Of the US Market Index’s 85.6% gain since May 2023, 22.76 percentage points come from semiconductor stocks—of that, 12.2 points come from Nvidia alone.

With these lopsided returns has come a historically high level of concentration within a small number of stocks. Despite repeated analyst predictions that the rally would broaden to include a wider group of names, the top ten stocks account for more than one-third of the value of the US Market Index, which contains 1,161 companies.

The AI trade beyond tech stocks

While Big Tech—and technology stocks in general—have been the main beneficiaries of the AI revolution, the data center buildout requires bricks and mortar, along with huge amounts of electricity. That has led to massive gains for companies at the center of that work over the past year. One of the biggest winners has been power supplier Bloom Energy BE, whose shares have skyrocketed more than 240% in the last six months. The company recently announced that first-quarter revenue was up 130% year over year.

Other beneficiaries of the AI infrastructure boom include construction and power supplier Caterpillar CAT, which expects power generation sales to triple this year compared with 2024. “The strength is broad-based, although data centers are a material driver,” said Morningstar analyst George Maglares in a recent analyst note following Caterpillar’s latest earnings report. “The company is expanding its addressable market to include primary power solutions in addition to backup generators. The magnitude and speed of these changes speak to management’s confidence and visibility into demand.”

Data center utility providers Quanta Services PWR and MasTec MTZ have also seen returns up more than 300% since May 2023. Returns for power supplier Generac Holdings GNRC have risen 117.9% over the last three years.

Thanks to AI, unicorns can fly

As the AI trade has played out in the public market, the impact has been widely felt among privately held companies—including the two biggest AI companies, OpenAI and Anthropic. OpenAI’s private-market valuation has leapt to $852 billion as of late March from $86 billion in January 2024, according to PitchBook. Anthropic was valued at $900 billion as of May 15, compared with $21 billion in July 2024.

More broadly, these valuation leaps have been captured in the Morningstar PitchBook Global Artificial Intelligence Index, which tracks the largest privately held, venture capital-backed AI companies with valuations of at least $1 billion. The benchmark counts Anthropic and OpenAI as the top two weightings, followed by China’s ByteDance, Stripe, and Databricks. The index is up more than 250% over the last three years, and it has more than doubled over the last year.