Technology, the new heartthrob of market rallies

economictimes.indiatimes.com:

artificial intelligence (AI), is driving the rally on Wall Street as the US economy heads into recession. The S&P 500 would be lower than at the beginning of the year without stocks like Apple, Alphabet, Meta, Microsoft and Nvidia climbing in the range of a third to more than double. Technology stocks have advanced nearly 40% in six months, the fastest pace in two decades.

They now trade at their highest premium to the market, except during the dotcom bubble era in the second half of the 1990s. Only, this time, it does not look anything like a bubble. Estimates put the AI opportunity by the end of the decade at between $6 trillion and $14 trillion.

And much of this opportunity is captured by the five technology companies, the High Five, that have a cumulative market cap approaching $9 trillion. The AI gold rush is being led by blue chips with world-beating balance sheets, which lower the odds of delay or collapse. Technology tsars are unanimous about the transformation of work, and company bosses are already shoring up bottom lines with machine learning (ML).

Yet, lawmakers could keep out excess froth by regulating a technology whose proliferation will hurt their constituencies. And investors may be ahead of themselves at such rich valuations if the boom does not does not conform to their playbook. The concentration of technology could slow its dispersal.

There is no frenzy yet in the startup world to build AI into products. AI-enhanced business applications will have a larger role in raising productivity when they are customised for specific industries. Big Tech, suppliers of horizontal AI — AI which can be used by any industry — will have to draw in smaller developers eventually.