View: Tech stocks look unstoppable now, especially fuelled by the seven biggest AI-pool companies
AI appears to be defying fundamentals. This could be the worst earnings season for US and European stocks since the pandemic, with a rising dollar affecting export performance, inflation squeezing margins and consumer spending weakening. Companies are still facing a tight labour market along with higher credit costs.
A revival in profits could materialise next year as the macroeconomic headwinds abate. Investor concerns over rising interest rates, slowing economic growth, sticky inflation and banking vulnerabilities have yielded to the buzz around AI since its potential became manifest last November. Technology companies were then in the middle of unprecedented layoffs to reverse the deep correction in stock prices of 2022.
The tide has turned. Technology stocks look unstoppable now. Specifically, seven of the biggest US technology companies — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — which have among themselves added $3.9 trillion in market capitalisation since the beginning of this year.
Nasdaq 100 is up by over 40% since January, its fastest half-yearly climb since the dotcom bubble. S&P 500, in comparison, is up by nearly 16%. The justification is that the AI opportunity could be anywhere between $6 trillion and $14 trillion by 2030.
So far, the largest pool of AI technology resides among these seven technology companies. The gold rush is being led by blue chips with pristine balance sheets. This increases the odds of a new productivity frontier emerging sooner than expected.
Technology leaders agree about the transformative scope of AI in work. But some find the inexhaustible investor appetite overwhelming. ‘Crazy times,’ Tesla boss Elon Musk tweeted this week as the market capitalisation of
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