In 2023, the seven tech giants dominated the US stock market, but why did Wall Street's predictions keep missing the mark?

Looking back at the 2023 US stock market, it was a feast led by technology leaders. The Nasdaq surged 40.77%, the S&P 500 rose 22.60%, and the Dow Jones climbed 11.90%, breaking through 37,000 points to hit a new all-time high. However, at the beginning of the year, mainstream Wall Street voices were completely opposite — most investment banks were bearish for the full year, only to be met with a loud slap from the market.

**How far off were Wall Street institutions' 2023 predictions?**

From late 2022 to early 2023, institutions like Goldman Sachs, Bank of America, HSBC, and Citibank issued pessimistic forecasts. Goldman Sachs chief strategist David Kostin's team believed the S&P would hover around 4,000 points; Societe Generale predicted a mild recession; JPMorgan and Royal Bank of Canada forecasted 4,200 and 4,100 points respectively.

Looking at this forecast comparison table makes it clear: Deutsche Bank predicted 4,500 points, Wells Fargo forecasted 4,300–4,500 points, and Barclays was the most pessimistic at 3,675 points. By December 13, 2023, the S&P stood at 4,707.09 points, far exceeding these so-called professional institutions' expectations. In other words, the market's rise surpassed Wall Street's optimistic predictions.

**Why did the US stock market turn around in 2023? Five key turning points**

■ **Q1: AI wave ignites the tech fire**
OpenAI's ChatGPT sparked the AIGC craze, with tech giants like Microsoft and Meta investing heavily in large language model development. The Nasdaq recorded its best quarterly performance since 2020 at the end of Q1, with the seven tech giants gaining over 20% in a single quarter, fueling investor imagination about the future.

■ **March crisis: Market sentiment sharply turns**
Silicon Valley Bank, Credit Suisse, and other financial institutions faced liquidity crises, spreading panic. Meanwhile, institutions like Morgan Stanley and JPMorgan warned that the rally in tech stocks was overextended and posed bubble risks. Concerns about security issues arising from rapid AI development also grew, with some tech figures calling for a pause on training more powerful AI systems.

■ **Q2: Inflation peaking supports the stock market**
Inflation data slowed, and the Federal Reserve's rate hikes approached their end, leading to expectations that a recession could be avoided. The AI craze remained hot, with the technology, communication services, and non-essential consumer goods sectors becoming the biggest gainers in the first half of the year.

■ **Q3 to October: High interest rate environment pressure**
Long-term bond yields soared to historic highs, and the high-interest environment suppressed stock valuations. Tensions in the Middle East escalated, and some heavyweight tech stocks reported weak quarterly earnings, narrowing market breadth and increasing correction pressures.

■ **Q4: Soft landing expectations drive a rebound**
Inflation continued to slow, the labor market remained strong, and the Federal Reserve hinted at possibly cutting rates three times in 2024. Treasury Secretary Yellen stated that the economy is heading toward a scenario that controls inflation while avoiding recession. Market optimism reignited, with tech stocks leading the rally again.

**The seven tech giants contributed three-quarters of the S&P's gains**

Over 75% of the 2023 US stock market gains came from seven leading tech stocks. Their early advantage in the AI wave made them the main drivers of market rallies. From Q1 to Q4, they almost dominated every upward movement, far outperforming other sectors and individual stocks.

**2024: Institutions' targets vary widely but remain generally optimistic**

Entering 2024, Wall Street institutions' target prices range from JPMorgan's 4,200 points to Deutsche Bank's 5,100 points, a span of 900 points.

JPMorgan is bearish, expecting economic slowdown and credit tightening; Morgan Stanley forecasts 4,500 points, optimistic about corporate profit recovery; Wells Fargo predicts 4,625 points but warns of increased volatility; Goldman Sachs forecasts 4,700 points, believing the economy will expand moderately; Barclays is most optimistic with a target of 5,000 points, citing that the market has passed the largest macro uncertainties; Deutsche Bank also remains bullish, with a forecast of 5,100 points.

Despite differences among institutions, most major banks adopt a relatively optimistic stance for 2024. Bob O'Donnell, President of TECHnaanalysis, states that 2024 will be the year when generative AI truly explodes; Goldman Sachs believes AI will profoundly impact the economy, productivity, competitiveness, and human civilization.

**Risks should not be underestimated**

However, amidst optimism, caution is necessary: potential variables such as the 2024 US election, recession risks, and geopolitical tensions remain, which could unexpectedly impact the US stock market.

In 2023, led by the seven tech giants, the US stock market achieved a spectacular reversal. Whether 2024 can reach new heights depends on whether AI truly explodes as scheduled and whether macroeconomic changes align with market expectations.