Forget AI and self-driving cars - 2 of the S&P 500's 5 best-performing stocks this year are cruise lines

• Royal Caribbean and Carnival are among the five best-performing stocks in the S&P 500 this year.
• The other three are tech titans: Nvidia, Tesla, and Meta Platforms.

Two of the five best performers in the S&P 500 this year have nothing to do with artificial intelligence, self-driving cars, or any other revolutionary technologies. They ferry people around the world on cruise ships.

Royal Caribbean Cruises stock has surged 97% this year, trailing only Nvidia (187%) and Meta Platforms (139%) in the benchmark US stock index. Carnival Corporation, another cruise line, has soared 81%. Elon Musk's Tesla rounds out the S&P 500's biggest winners this year, with a 96% gain.

Royal Caribbean and Carnival have racked up those massive gains in 2023 for a few reasons. A key one is the pair have a lot of ground to make up; they were among the hardest-hit stocks during the COVID-19 pandemic, as the cruise business ground to a halt once global travel restrictions were imposed.

Despite their robust gains this year, Carnival shares still trade about 70% below their pre-pandemic levels, while Royal Caribbean shares are down by around 25%.

The release of pent-up demand for travel has also revitalized the companies' operations, their latest earnings reports show.

For example, Royal Caribbean's revenue nearly tripled year-on-year to $2.9 billion in the first quarter as both ticket and onboard sales soared. As a result, the operator swung from a nearly $900 million operating loss to an almost $300 million profit, and more than doubled its full-year growth expectations to as high as 7.75%.

Meanwhile, Carnival's revenue jumped by about 230% to over $9 billion in the first six months of this year, fueling a $120 million operating profit — a sharp contrast to its $1.5 billion operating loss in the same period of 2022. The company raked in record second-quarter revenue, and passenger bookings for future trips hit an all-time high.

Royal Caribbean and Carnival are riding high on a tidal wave of demand, and their stock prices are still well below pre-pandemic levels.

Their fortunes could turn if stubborn inflation, higher interest rates, and a looming recession lead consumers to pull back on spending – but for now, they're holding their own against some of the most buzzy stocks on the market.