The chief economist of American asset management giant Vanguard has warned that market players betting wildly on the technology are risking a correction.
According to the Financial Times, investor enthusiasm for AI equities in the US stock market has overestimated the near-term potential of the technology, risking a correction in share prices, chief economist Joe Davis warned.
RT reports: AI-related stocks have become key drivers behind the rise of the US stock market, with the S&P 500 index soaring by 27% this year.
About one fifth of the increase comes from the contribution of Nvidia, a core chip supplier for AI, which saw its stock price rocket by nearly 180% year to date in 2024.
Vanguard chief economist Joe Davis, however, believes investors are overplaying the short-term impact of the technology, even if AI shows similar “revolutionary” effects to the emergence of the personal computer in the 1980s, the outlet wrote on Tuesday.
He claimed that in the US technology and communication services sectors, share prices are “inexplicably high” relative to expected rates of corporate profit growth.
We see roughly 60% to 65% odds that AI is more impactful than the personal computer. The US stock market today is pricing roughly a 90% probability, said Davis.
He compared the current economic situation to that of the 1990’s, when a PC boom led to a massive surge in equities prices, resulting in the telecom-driven meltdown in 2000.
From an economic perspective we’re roughly in the year 1992 but from the market valuation perspective, I can make the argument that we’re in 1997,” he added, implying that there could be a bubble risk in the current market.
According to Davis, who leads the world’s second-largest asset management group, investors grow euphoric early on then suffer disappointment when the new technology’s potential is not quickly realized.
Although AI could bring transformative effects in the coming years, earnings growth expectations for the next three to five years are “wildly” optimistic.
Davis also warned that companies most closely related to the AI investment boom may not become the ultimate profit-makers. The real beneficiaries are entities that actually apply the technology such as hospitals, utilities, and financial companies.
News Punch / ABC Flash Point News 2024.
You know its funny using DDG as a search engine all the answers come up anti Russia viewed from a US perspective but using a small European search engine the truth is revealed . Instead of “Russia way behind in AI” and “Russia useless in AI” with added “Russian aggression in Ukraine” it actually gives a more positive outlook with Russia investing heavily in AI due in part to a lack of trained technical staff in that area . Also instead of referring to dates years back I can now get up to date answers in 2024 .Including “Russia is… Read more »
The same narrative supports women soccer and LG TB to manipulate the young in the early dats of their lives?
Not Mark Knopfler ? but your right brainwashing toddlers to accept LGTB and other minority groups and if you complain you are “sexist /racist/ etc” and jailed or torn to pieces in the George Soros controlled media .
We no longer have control over our own children they are forced to accept non normal actions as a result Scotland is the worst drug addicted country and suicide rate percentage of population in Europe.
Look at UK advertising its totally biased against heterosexual masculine males .
Although AI could bring transformative effects in the coming years, earnings growth expectations for the next three to five years are “wildly” optimistic.
NVDA went from 350 million in 2022 to 3.5 BILLION in 2024 all from AI pie$$ in the sky and still the largest company in the world.Your writing on it right now AI is smart and steals data 247365247 data farming
AI should have never been developed. I refuse to use AI and 5G.