Antonio De Negri (Smart Bank): “Artificial intelligence is good for US GDP”
On average, it is estimated that artificial intelligence will lead to a 26% increase in US GDP by 2030, an impact of approximately 16 trillion dollars. If this were to happen, the impact would be far greater than the spread of computers. Antonio De Negri, CEO of Smart Bank, explains to Truth&Business how to invest in American companies that will benefit from the advent of artificial intelligence.
How is the American economy doing, what is the state of the stars and stripes companies?
US companies that recently released quarterly results account for more than 86% of the total US market capitalization. The picture is therefore clear, the results were solid and exceeded expectations, both in absolute and relative terms. Taking as reference the aggregate of the index
S&P500, for example, the contraction in profits recorded is only 3% on the year, compared to the -7% forecast by analysts. Margins, although contracting for the third consecutive quarter, also turned out to be above expectations, especially in the technology and communications sectors. It is precisely these sectors that include companies with greater capitalization, which therefore have a greater weight in the indices and which therefore contribute substantially to supporting the general market.
What’s next for overseas companies?
The widespread idea among experts is that the downward revision cycle of results is now coming to an end, given the number and quality of positive surprises in the first quarter of the year. Many analysts are already revising their 2024 earnings forecasts upwards, while forecasts for 2023 still tend to be conservative, with the majority not expecting any growth in earnings. The uncertainty associated with monetary policies and interest rates now seems to be a thing of the past, with the bond market moving at price levels that even imply rate cuts this year. However, for some the other great specter, that of the recession, is very much alive and persists even with results and sales beyond expectations.
How to look at US stocks in the light of these conditions?
From a portfolio allocation standpoint, strategists do not seem particularly interested in the potential recession, believing that it is already reflected in current stock prices. At the same time, they bring attention to other points, which could limit equity gains. In particular, the ratings are on
pre-pandemic levels, and especially risk-free interest rates – sovereign bond yields – have risen sharply. This not only makes it less attractive to buy equities with current risk premiums, but it also triggers significant outflows from equities into money market securities, which in fact
they raised record investments. In general, the consensus among analysts and strategists is that the US stock market is, and will continue to be, in a generally correct price range. No extraordinary dangers are foreseen on the horizon, but it is likely that some pitfalls will limit the increases.
Will the technology sector continue to represent an opportunity? there is a lot of talk about artificial intelligence.
Certainly, and in particular the increasingly widespread adoption of artificial intelligence, represents something extremely interesting whose macroeconomic consequences will be impressive. Analyst forecasts vary widely based on assumptions about speed and breadth of adoption, but on average, it is estimated that
artificial intelligence will lead to a 26% increase in GDP by 2030, an impact of approximately 16 trillion dollars. If this were to happen, the impact would be far greater than the spread of computers. Not only that, an effect on future consumption habits is expected to be around 9 trillion dollars.
An area only for the giants of information technology or that it will be able to open up to new realities?
Although affirming realities such as Google and OpenAI, both supported by Microsoft, are quickly establishing themselves as a reference player for Generative AI, analysts cannot take the formation of an oligopoly for granted. Conversely, given the ability to easily train new Intelligences
artificial, it is expected that many small realities will emerge, each modeled for specific needs, such as planning a trip, obtaining legal advice or investing in the stock market. Furthermore, this area can be approached in a different way and not wondering which horse is the winner, but trying to invest in the racecourse. Companies that offer computing power and cloud services, albeit behind the scenes, will benefit from the artificial intelligence revolution by providing the essential technologies on which to build the infrastructure.