Over the past year, I’ve noticed something while watching the U.S. stock market. It’s not just money flowing in—there is a genuine growth market unfolding, with performance truly backing it up. There’s also growing optimism around interest rate cuts, and the AI and semiconductor sectors are expanding in a truly explosive way.

Right now, the S&P 500 is trading in the late 6,000s and is up about 12% compared to the same period last year. The Dow Jones is also hovering near record highs. But what’s important is that this isn’t simply a liquidity-driven market. The expansion in earnings from top large-cap companies is becoming the real foundation. Especially when you look at how massive AI infrastructure investment is, it’s likely this trend will continue for a long time.

When recommending U.S. stocks, what should you look at first? In my view, there are four key factors. First, financial strength. In times like these, when volatility is rising, you can’t overstate how important it is for companies to have stable cash flow. Companies like Apple and Microsoft, which hold hundreds of billions of dollars in cash, can weather economic slowdowns without much trouble.

Second is competitiveness. Especially in AI and semiconductors, a technological gap directly translates into company value. The reason Nvidia has captured more than 80% of the GPU market isn’t just that its chips are good—it’s because it has created a structural advantage by building the entire CUDA ecosystem. This makes it nearly impossible for competitors to catch up quickly.

Third, how should you think about valuation? Just because tech stocks have high P/E ratios these days doesn’t automatically mean they’re overheated. Tesla’s P/E, which is over 60, isn’t because it’s merely an electric vehicle company; it’s because it has new growth engines such as robotaxis and the energy storage business. In the end, you need to look at both the quality and the visibility of earnings growth.

Fourth, growth potential. The global growth axis is clearly narrowing down to AI, healthcare, and clean energy. Google is growing at more than 10% annually through generative AI like Gemini and its cloud services, while Apple continues to grow its software and subscription service revenue through on-device AI. Healthcare companies are also creating new revenue streams driven by aging trends and AI diagnostic technology.

If you think about the U.S. stocks to recommend, the companies leading the market this year are already set. Nvidia is still #1 in AI acceleration chips, and Microsoft’s Copilot monetization has moved into its main phase. Apple is growing service revenue with on-device AI, and Alphabet is maintaining momentum with Gemini 2.0 and YouTube ad recovery. Amazon is seeing results from improved AWS margins and retail automation, while AMD is expanding market share with its MI series and improving its data center mix.

Meta is enhancing its AI recommendation engine to raise ad efficiency, and Tesla is growing its earnings base through FSD and the energy storage business. For defensive options, Costco is showing steady growth in a period when inflation is easing, and UNH has clear long-term growth potential thanks to aging-related tailwinds and Optum’s data analytics business.

Looking at the current market’s characteristics, the structure is such that AI and semiconductors are pulling everything forward. Other sectors exist, but the growth momentum is clearly concentrated in tech stocks. Healthcare is polarizing around obesity treatment themes, and clean energy received a temporary pullback due to the burden of interest rate hikes, but in the long term it still has growth potential. Consumer goods and the financial sector are still showing more defensive trends.

For an investment strategy, I’d like to recommend a few approaches. First, diversified investing through ETFs. With a single purchase, you can gain exposure to multiple industries, and ETF inflows continue to increase thanks to major asset managers such as BlackRock and Vanguard. Morgan Stanley expects ETF inflows to rise by 15% on average per year over the next 3 years.

Second, a dollar-based phased buying strategy. In a time like this, when volatility is high, investing a fixed amount on a regular basis is the most realistic approach. According to JPMorgan Asset Management data, if you invest steadily in the S&P 500 for 10 years, the probability of loss is under 5%. You also get psychological stability, and the downside risk is diversified.

Third, risk management is truly crucial. You must follow the basic principles of limiting position size, setting stop-losses, and diversifying by sector. Adjusting sector weights that have become overextended through quarterly rebalancing is also a strong defensive measure.

Finally, when recommending U.S. stocks, I want to add one more point. The market is at the beginning stage of a gradual bull run. Earnings-based structural growth centered on AI is continuing, and the Fed is also maintaining a more accommodative stance. Of course, in the short term there may be pullback factors such as tech stock overheating or geopolitical risks, but the market’s downside is firmly supported by a stable inflation trend and a solid structure of corporate profits.

Ultimately, the key over the next 5 years is long-term diversification and risk management. If you build your portfolio using ETFs, rebalance regularly, and stick to consistent investing principles, you can expect stable compound returns even amid short-term volatility. I believe that focusing on companies with solid fundamentals—not chasing stocks that are surging—is the real path to success.