Nvidia Is Leading the Stock Rally, But Don't Overlook Berkshire Hathaway

$NVIDIA Corp(NVDA)$    is driving an outsize share of the stock market's rally. But some other stocks are doing some heavy lifting, as well -- including non-technology names.

Nvidia stock is up 62% so far this year, beating the 6.7% rise in the S&P 500. Nvidia's outperformance -- with artificial intelligence driving both growth and stronger-than-expected earnings results -- is a key reason that the index has seen its gain for the year.

The chip maker's market capitalization is almost $2 trillion, almost 5% of the S&P 500's total market cap. Companies with larger market caps have a larger influence on the movements of the index, because the index's price level is weighted by market cap.

Some may wonder how it's possible that other stocks are contributing to the market's gain if Nvidia stock is up a ton, while the index is only up by single digits. Well, the reality is that only four of the S&P 500's 11 sectors had outperformed this year as of Monday morning, which means those four sectors -- tech, financials, healthcare, and communications services -- are responsible for the gain in the market.

In financials, it's $Berkshire Hathaway(BRK.B)$   leading the charge, up about 20% for the year. It helps that Warren Buffett's company just beat earnings estimates for the fourth quarter. More generally, Berkshire Hathaway has recently seen strong profit growth on the back of rising investment income and book value. The company also continues to buy back stock, increasing earnings per share.

In healthcare, $Eli Lilly and Co (LLY.US)$'s stock continues its torrid run, up 33% so far this year. The drugmaker, with a market value of over $700 billion, is expected to see continued growth of its weight-loss products. Lilly is cash-rich, and continues to repurchase stock, bolstering double-digit annual growth, in percentage terms, in earnings per share for the next several years, according to FactSet consensus estimates. The company also just reported strong quarterly earnings, and analysts have raised profit forecasts so far this year.

Two stocks that are at last tech-adjacent but are categorized as communications stocks, $Meta Platforms, Inc.(META)$   and $Netflix(NFLX)$  , are up 37% and 20% respectively for the year. Their market capitalizations combine for about $1.5 trillion.

Meta is expected to see double-digit annual growth in earnings per share, as the parent of Facebook and Instagram is using AI to enhance the attractiveness of its advertising offering across its platforms.

Netflix is expected to see similar earnings-per-share growth, as the streaming giant spends less to add more subscribers overseas. It's also generating ad dollars, increasing total revenue. Both Meta and Netflix have seen profit forecasts move higher this year.

While many non-tech sectors are struggling this year, a few aren't -- ones that have long-term growth opportunities, high free cash flow, and strong balance sheets that help these firms return money to shareholders. There's plenty of reason to own the S&P 500.

"A handful of names tend to drive overall market performance," DataTreks' Nicholas Colas notes. "We don't consider this unusual or worrisome. Bull markets always have leadership names, and it is heartening to see that two of the four stocks propelling sector outperformance are not related to technology," he wrote, referring to Lilly and Berkshire

Rally on for now.

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