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Artificial intelligence gives real boost to U.S. stock market
Recent advances in artificial intelligence are fueling optimism over how businesses can operate more productively in the years ahead. They are also providing a big boost to the stock market.
The S&P 500's ( $S&P 500 Index (.SPX.US)$ ) 9% rally this year has been driven by a handful of the index's biggest stocks, a number of which are at the center of the AI frenzy that has spread in the wake of the chatbot sensation ChatGPT.
The S&P 500's ( $S&P 500 Index (.SPX.US)$ ) 9% rally this year has been driven by a handful of the index's biggest stocks, a number of which are at the center of the AI frenzy that has spread in the wake of the chatbot sensation ChatGPT.
Five stocks - $Microsoft (MSFT.US)$ , $Alphabet-C (GOOG.US)$ , $NVIDIA (NVDA.US)$ , $Apple (AAPL.US)$ and $Meta Platforms (META.US)$ - are responsible for the S&P 500's entire year-to-date return, said Jessica Rabe, co-founder of DataTrek Research. About 25% to 50% of those gains are owed to "the buzz around artificial intelligence," she noted.
A recent Societe Generale analysis zeroed in on 20 stocks widely owned by AI-related exchange-traded funds, whose overall assets under management have grown almost 40% this year.
Goldman Sachs strategists estimate that generative AI could create productivity gains that result in S&P 500 companies expanding profit margins by about 4 percentage points in a decade following widespread adoption.
Indeed, optimism over AI is a key factor supporting a stock market facing numerous headwinds. Those include uncertainty over the U.S. Congress coming to agreement to raise the debt ceiling and avoid a default, and worries the economy may be on the verge of a downturn, as the Federal Reserve's interest rate hikes filter through the economy. "We are strongly of the view that AI will change the world," Jim Reid, strategist at Deutsche Bank, said in a note titled, "Will ChatGPT prevent the US recession?"
The excitement surrounding artificial intelligence (AI) has driven gains for stocks such as Microsoft, whose shares climbed 32% this year. Nvidia, whose chips are central in the boom, saw a 110% increase in its shares, while the Global X Robotics & Artificial Intelligence ETF rose almost 30%. However, a recent BofA Global Research report said AI stocks were in a "baby bubble" compared to online shares and bitcoin of the last few decades. Despite this, investors say AI is no fad, as its growing technology can lead to earnings growth for companies such as $Microsoft (MSFT.US)$ and $NVIDIA (NVDA.US)$
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