The U.S. stock market has been entering a truly interesting phase since last year. In particular, the explosive growth of the AI and semiconductor sectors is attracting the attention of investors worldwide, and the key point is that this is not just a liquidity-driven market but a profit-driven market supported by actual corporate earnings.

Since the end of last year, expectations of interest rate cuts have pushed the S&P 500 to the high 6,000s, up about 12% compared to a year ago. The Dow Jones Industrial Average is also maintaining near its all-time high. The Federal Reserve continues its easing stance, so surplus funds are flowing into risk assets continuously.

What’s interesting is that this rally is not relying solely on liquidity as in the past. The real driving force is the earnings growth of large-cap stocks, especially with AI, semiconductors, and cloud industries acting as new growth engines. 95% of S&P 500 companies are expecting an average profit growth of about 16% next year, with the top 8 tech giants projected to grow by 21%.

When selecting stocks in the U.S. stock market, there are four key factors to consider. First is financial health. Companies like Apple and Microsoft each hold over $600 billion in cash equivalents, giving them the resilience to withstand economic downturns. Second is competitiveness and barriers to entry. As Nvidia dominates over 80% of the AI GPU market, technological gaps are translating directly into corporate value. Third is valuation. A high PER doesn’t necessarily mean overheating. Tesla maintains a PER over 60, but this reflects expectations for new business models like robotaxis and energy storage systems. Fourth is growth potential. It’s important to assess where the company will stand within its industry in three or five years.

Currently, the U.S. stock market is moving within an asymmetric structure where AI and semiconductors lead the overall market. Nvidia’s revenue this year increased by 114% year-over-year, with data centers accounting for about 91% of total revenue. AMD is also expanding its market share through the MI300 series. Microsoft and Google are strengthening their cloud competitiveness with proprietary AI chips, and Meta is improving ad efficiency through advanced AI recommendation engines.

The healthcare sector is showing polarization centered around obesity treatments. Eli Lilly and Novo Nordisk posted strong earnings, while traditional pharmaceutical companies saw their stock prices decline by 15-20% due to revenue slowdown. The clean energy sector faces short-term burdens, but long-term benefits include cost stabilization and falling energy storage costs. Consumer staples and financial sectors are still showing defensive trends.

Among the notable top 10 stocks, Nvidia is the leader in AI acceleration chips, with strengths spanning from data centers to software ecosystems. Microsoft benefits from Copilot monetization and Azure AI customer lock-in effects. Apple is expected to see high service revenue growth through on-device AI. Alphabet’s key factors are Gemini and the recovery of YouTube advertising, while Amazon’s focus is on improving AWS margins. AMD is catching up as the second-largest AI accelerator provider, and Meta’s ad efficiency improvements are a key re-rating factor. Tesla’s FSD and energy storage are expanding its earnings base, and Costco’s defensive growth benefits from the deceleration of inflation. UnitedHealth is benefiting from aging demographics and growth in Optum data.

For investment strategies, first, diversified investment through ETFs is recommended. As of July 2025, the global ETF market size exceeded $17 trillion, highlighting the importance of long-term diversification. Using growth sectors like AI and semiconductors along with dividend, healthcare, and defensive ETFs can reduce individual stock risks.

CFDs allow flexible trading through leverage but carry significant loss risks. European regulators warn that 70-80% of CFD accounts experience losses, and in the U.S., retail CFD trading is effectively prohibited. Therefore, they should only be used cautiously by experienced investors or for short-term hedging.

Dollar-cost averaging (DCA) is highly effective in volatile markets. According to J.P. Morgan Asset Management, a consistent 10-year investment in the S&P 500 has less than a 5% chance of loss. DCA provides psychological stability, reduces downside risk, and is a practical defensive strategy to maintain long-term returns amid the AI-driven unbalanced rally.

Risk management is at the core of all investment strategies. Limiting position sizes, setting stop-losses, and sector diversification are fundamental. During FOMC or CPI announcement weeks, reducing positions to manage volatility is also crucial. Quarterly rebalancing to adjust overheated sector weights is equally important.

Ultimately, the U.S. stock market is at the early stage of a gradual bull market. The structural growth driven by earnings centered on AI, combined with the Federal Reserve’s easing stance, suggests that risk asset preference will gradually strengthen. In the short term, factors like tech stock overheating or geopolitical risks may cause some adjustments, but stable inflation and solid corporate earnings are firmly supporting the market’s downside.

Over the next five years, the key is long-term diversification and risk management. Building a portfolio with ETFs, regularly rebalancing, and adhering to consistent DCA principles can deliver stable compound returns even amid short-term volatility.