investors a fillip. This year the S&P 500 index of big American firms is up by nearly a fifth. Markets are especially bullish about a handful of tech firms and carmakers.
These are among the S&P 500’s most AI-obsessed members, according to our early-adopters index (which takes into account factors such as AI-related patents, investments and hiring). And they have done well in the here and now, too: all reported respectable second-quarter results in the latest earnings season. But what about the health of the broad swathes of the American economy that are less affected by the tech hype? Here the picture is more complex, but ultimately reassuring.
Start with the bad news. Some of the businesses least prepared for an AI future are suffering in the present, too. Health-care companies look sickly: UBS, a bank, estimates that their profits slumped by nearly 30% compared with last year (see chart).
CVS Health, a chain of chemists (ranked 218th in our AI index), is slashing 5,000 jobs after its earnings sank by 37%. Energy firms made half as much money in the second quarter of 2023 as they did a year earlier, when Russia’s invasion of Ukraine pushed up oil and gas prices. With other commodity prices also down, in part owing to lacklustre appetite from a sluggishly growing China, materials firms’ profits are down by 30%.
As a consequence, overall earnings for S&P 500 firms are estimated to have slid by 5% in the second quarter, year on year, according to FactSet, a data provider. That is the biggest decline since early in the pandemic. But the pain has mostly been concentrated in a few sectors.
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