Key Takeaways

• The technology sector and large-growth stocks were the biggest winners in the second quarter.
• AI giants Nvidia, Microsoft, and Broadcom were the leading individual contributors.
• Healthcare stocks, energy stocks, and Apple were the primary drags on the market.

As the stock market came roaring back in the second quarter, Big Tech was back in the driver’s seat. After dropping 9.8% in the first week of the quarter, the US stock market rebounded to close the quarter up 11.1% in US dollar terms, led by artificial intelligence giants Nvidia NVDA, Microsoft MSFT, and Broadcom AVGO.

Of the 11.1% return on the Morningstar US Market Index, 6.7 percentage points came from the technology sector—four times the amount added by the next-biggest contributor, communication services, which added 1.7 percentage points. The Morningstar US Technology Index gained 22.0% in the quarter—double the return on the stock market—while the Morningstar US Communication Services Index gained 18.8%. Both sectors posted negative returns in the first quarter but are still up in the year to date.

Other notable contributors were consumer cyclicals, which added 1.3 points, and industrials, which added 1.2 points. The leading drag on the market was healthcare, detracting 0.7 points.

Looking at the nine Morningstar Style Box categories, large growth had the largest contribution at 4.9 percentage points, while large blend had the second-largest contribution at 3.4 points. The Morningstar US Large Growth Index gained 23.1% in the quarter, while the Morningstar US Large Core Index gained 9.0%. The worst performer was large value, gaining just 0.9%.

AI Stocks Lead Market Performance in Q2

Drilling into the second quarter’s biggest winners, tech and large-growth stocks, a common thread appears. A few major players capitalizing on artificial intelligence hype continued carrying the market.

The top five contributors—Nvidia, Microsoft, Broadcom, Meta Platforms META, and Amazon AMZN—combined to account for 6.1 of the 11.1 percentage points gained by the US stock market in the second quarter, and they currently hold a 20% weight in the index.

Nvidia, which surged 45.8% and makes up 5.7% of the market index, accounted for 2.2 percentage points alone. Following the company’s first-quarter earnings report in May, Morningstar equity strategist Brian Colello wrote: “We’re encouraged by Nvidia’s revenue growth despite being blocked from selling H20 products (custom-built for China’s artificial intelligence market). This caused a $4.5 billion inventory write-off and foregone revenue of $2.5 billion and $8.0 billion in the first and second quarters, respectively.”

Colello continued: “We raise our fair value estimate for wide-moat Nvidia to $140 per share from $125 as Blackwell supply (and revenue) expanded faster than we anticipated and should support higher long-term AI revenue.”

Microsoft, which holds the largest weight in the index at 6.2%, climbed 32.8% in the first quarter and added 1.7 points to the market return. Following the firm’s first-quarter earnings call in April, Morningstar senior analyst Dan Romanoff wrote: “Results are good across the board, with upside to our estimates on top and bottom lines. Revenue for all segments was above the high end of guidance. Critically, we see very impressive performance within Azure, in traditional and artificial intelligence workloads.”

Romanoff continued: “Overall guidance is impressive in this environment. Microsoft provided better-than-expected guidance on the top and bottom lines, including $73.7 billion in revenue, 43.4% operating margin, and $3.34 in earnings per share at the midpoints.”

Zooming out to look at the top 15 contributors to the market return, only four stocks—Netflix NFLX, JPMorgan JPM, GE Vernova GEV, and GE Aerospace GE—are not known for their AI prowess.

Healthcare, Energy, and Apple Struggle in Q2

Out of the 11 US sector indexes, energy, which dropped 7.7%, and healthcare, which fell 6.1%, struggled the most in the second quarter.

Healthcare, which according to analysts is priced the cheapest it has been in five years, is facing major headwinds from policy concerns, including President Trump’s intention to lower US drug prices. Two of the five biggest drags on the market—UnitedHealth Group UNH and AbbVie ABBV—are healthcare stocks.

UnitedHealth, which plummeted 40.0% in the second quarter and detracted 0.4 percentage points from the return on the market, has faced setbacks from scrutiny around some of its business practices. In May, Morningstar senior equity analyst Julie Utterback wrote: “The Centers for Medicare and Medicaid Services announced plans to increase regulation of the Medicare Advantage market to curb overpayments to private insurers like UnitedHealth. As the largest Medicare Advantage insurer that may have been more aggressive than peers in risk assessments, UnitedHealth could be subject to a big clawback of overpayments and lower margins in that business.”

Energy stocks have faced headwinds of their own due to falling oil prices and a slowing economy. Exxon Mobil XOM, which fell 8.5% in the second quarter, Chevron CVX, which dropped 13.4%, and ConocoPhillips COP, which lost 13.8%, all fall into the top 15 detractors from the return on the market.

The leading drag on the market was neither a healthcare nor an energy stock, but instead was among the biggest tech stocks: Apple AAPL. With a 5.4% weight in the US Market Index, Apple tumbled 7.5% in the second quarter and detracted 0.5 percentage points from the market’s gain. Following the company’s first-quarter earnings report, Morningstar senior equity analyst William Kerwin wrote: “Results and revenue guidance were positive to us, but margin guidance was weak, resulting from an estimated $900 million impact from US tariffs. As primarily a hardware company, we see material risk for Apple from tariffs, both on profitability and longer-term demand.”

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.