the health strategist
institute for research & strategy
Joaquim Cardoso MSc
Chief Research & Strategy Officer (CRSO),
Chief Editor and Senior Advisor
August 21, 2023
Central message:
- There is a huge complex landscape that AI has created in stock markets, with both opportunities and challenges for investors and stock pickers.
- It underscores the need for careful assessment and adaptation to navigate the evolving market dynamics driven by AI technologies.
This is a one page summary of the article “The AI wave will only benefit smart stockpickers”, written by NICHOLAS MEGAW, and published on the Financial Times.
Key points
Positive Impact of AI on Stock Markets:
- The growth of artificial intelligence has been a consistently positive force in US stock markets.
- The shares of the seven largest tech companies by market capitalization have driven the S&P 500 into a bull market, despite concerns about inflation and the financial sector’s health.
Tech Stock Ownership:
- The surge in tech stock prices has prompted investors who were bearish (expecting market declines) to invest in the market.
- While prices have experienced some decline recently, ownership of big tech stocks among active fund managers remains higher compared to the beginning of the year.
AI Investment Strategies:
- Wall Street banks are offering AI-themed investment strategies.
- For instance, Citi’s AI “basket” provides a shortlist of companies expected to benefit from AI, and Bank of America’s “AI Risk Index” identifies companies at risk due to AI disruption.
Changing Investor Sentiments:
- Investor opinions about AI companies are changing rapidly.
- For example, Google’s parent company, Alphabet, went from being perceived as falling behind its rivals in AI innovation to being seen as a beneficiary, thanks in part to its developer conference’s announcements.
AI’s Impact on Business Models:
- AI’s potential to improve productivity raises questions about traditional business models.
- The ability to predict long-term cash flows and earnings might require shorter timeframes due to AI’s disruptive influence.
AI’s Real-Use Cases:
- AI is not just a passing trend; it has real-use cases that are already affecting major companies financially.
- The article draws a parallel with the late ’90s and early ’00s internet bubble, where trends were identified, but the pace and beneficiaries were misjudged.
Past Market Comparisons:
- The article compares the current situation to the late ’90s tech bubble, highlighting that not all dominant players from that era remained dominant over time.
- Microsoft is the only company among the top 10 US market capitalization companies from early 2000 that remains in the S&P 500’s top companies today.
AI and Nvidia’s Role:
- Similar to how Cisco’s infrastructure played a role in the early internet era, Nvidia’s chips are positioned to be key components for those who best utilize AI technologies.
Challenges for Stock Pickers:
- The article emphasizes that AI’s impact on stock markets is not universally good or bad for stock pickers.
- While it presents opportunities, it also demands careful analysis.
- Successful stock pickers may thrive in this evolving landscape, while those who don’t adapt might struggle.
Long version originally published at https://www-ft-com.ezp.lib.cam.ac.uk/content/7283d1b0-80b1-4fe7-b077-df28c5ca035e
