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Stocks that invest in artificial intelligence, or AI, have been the dominant force on the market over the past several years.

But this year, many AI stocks were hit hard, particularly in the first part of the year. Much of the impact came from the stocks being so overvalued, due to the massive run up the past two years, that the prices were unsustainable.

But there were also other factors, like a slowing economy, still high interest rates, and the shock of tariffs and trade wars, that slowed AI stocks down.

Take NVIDIA (NVDA), for example, the chipmaker that has become synonymous with AI. Over the previous two years it posted gaudy annual returns of 171% in 2024 and 239% in 2023. It started the year at $138 per share, but by April it had fallen roughly 37% to around $87 per share.

But since then, NVIDIA has taken off, as trade deals have been worked out, China opened back up as a market, and it continued to produce strong earnings fueled by the growth of data centers and its new high-performance Blackwell chips.

Since that April low, NVIDIA stock has more than doubled and is currently trading at around $181 per share. Year-to-date, NVIDIA is now up 35% — which pales in comparison to the last two years, but it’s only August.

The resurgence of NVIDIA is representative of what has occurred with many AI stocks, as the leading index that tracks AI stocks, the Morningstar Global Artificial Intelligence Select Index shows.

AI stocks are now beating the market

The Morningstar Global Artificial Intelligence Select index tracks roughly 50 stocks that are heavily involved in AI technology. Specifically, the index includes stocks with significant exposure to generative AI, AI data and infrastructure, AI software, and AI services. Among the top names in the index are NVIDIA, AMD, Broadcom (AVGO), Microsoft (MSFT), Palantir (PLTR), Oracle (ORCL), Alphabet (GOOGL), META, Amazon (AMZN), and Micron (MU), to name a few.

The index has, for the most part, mirrored NVIDIA’s ups and downs this year, dropping precipitously in the first three-plus months, then storming back since mid-April.

Currently, the Morningstar index is up about 16% year-to-date, which beats the 9% YTD return of the S&P 500 and the 12% YTD return of the Nasdaq Composite. When compared to sectors, the AI index would beat every sector except Communication Services and IT, both of which are also up 16% each. Obviously, most of the AI stocks in this index are within those two sectors.

Of course, not all AI stocks on the Morningstar Global AI Select index are up. The winners, like NVIDIA, Palantir, up 144% YTD, and Cloudfare, up 86%, are offset by stocks that have dropped sharply, like EPAM Systems (off 31%), Accenture (down 30%), and ServiceNow (down 19%).

More good days ahead?

In general, Morningstar Senior Equity Analyst Brian Colello sees more good days ahead for AI stocks.

“We see few signs of AI demand slowing down in any meaningful way. Leading tech companies have suggested that the rise of AI might be more meaningful to society than the internet, and all of these leaders are investing heavily,” Colello said. “Meanwhile, AI usage is supporting these investments—it makes little sense to hoard AI equipment with short useful lives, so we still view these investments as paying off handsomely in the near term and likely for much longer.”

It should be noted that valuations are rising again with the rapid growth of AI and technology stocks over the past few months. Investors should check the valuation metrics of any individual AI stock, and not just the return, before investing to determine if continued growth is sustainable.

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