The AI juggernaut that has fueled the S&P 500 (^GSPC) rally this year is expected to keep driving returns over the next six to 12 months, according to BlackRock analysts.

"A case can still be made to be risk on,” Wei Li, global chief investment strategist at BlackRock Investment Institute, said during a media roundtable on Tuesday.

Reasons Li and her team are bullish on US equities include companies' enormous capital spending on AI and increasing demand for low-carbon energy. Investments in AI data centers, for example, are expected to rise by 60%-100% annually in the coming years, said Li.

"When we add up all this capex spend we get to numbers rarely seen in history comparable to the Industrial Revolution," she said.

In early July, a record $6.15 trillion was sitting in money market funds while the S&P 500 has notched 36 record highs this year.

In the first half of 2024, the broad-based index rose nearly 15%, with a handful of stocks leading those gains. Notably, AI heavyweight Nvidia (NVDA) accounted for nearly one-third of the S&P 500's rise during the first six months of the year, while an outperformance in quarterly results from large-cap tech has contributed to the index's overall earnings growth year-over-year.

However, BlackRock strategists don’t see the concentration of equity performance as a problem given megacaps have delivered on earnings. They expect continued performance from large technology companies investing heavily in the AI build-out, chip producers and firms supplying inputs like energy and utilities.

“We think markets are likely to keep rewarding perceived AI winners in the next six to 12 months – regardless of where the transformation leads longer term,” said the asset management firm’s 2024 Midyear Global Outlook.

Investors should consider “leaning into risk, stepping away from cash, and really thinking of pockets where there are opportunities,” said Gargi Chaudhuri, chief investment and portfolio strategist for the Americas at BlackRock Investment Institute.

Such pockets include Energy, Health Care, Industrials, Materials and Utilities — sectors that are set to benefit from the AI boom.

The growing need to power everything from data centers to chip manufacturing plants has sent the S&P 500 Utilities ETF (XLU) up more than 8% year to date, compared to a loss of roughly 7% in 2023.

The strategists say risks that could slow down or interrupt AI's build-out and adoption include potential challenges from policy and regulations, rules on the use of artificial intelligence, and supply bottlenecks amid growing demand for metals and minerals like copper, aluminum, and lithium.

Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.