Jens Nordvig, Founder and CEO of Exante Data Inc., discusses the emergence of AI and its impact on the S&P 500 and the job market.
video transcript
– Well, the S&P 500 is up over 9% so far this year. Bank of America Global Research strategists said the rise was largely driven by seven big tech companies, including Apple, Microsoft and Alphabet.
And over the last 12 months, Apple, Alphabet, and Microsoft alone have made a combined $222 billion. That’s about 14% of the gains the S&P 500 made in that period, according to data from S&P Global Market Intelligence.
So, is the continued focus on big tech a concern? Back to the topic, Jens Nordvig, Exante, excuse me, Founder and CEO of Data Inc. So should we be concerned about such a concentration of growth and earnings among the tech giants here?
Jens Nordwig: So there is a very big theme behind artificial intelligence. And we go through these phases in the market. There comes something new that is potentially very disruptive and very profitable for some players in the market.
Clearly there was a so-called dotcom bubble with bubble elements. Not long ago, there was a time when many people were very focused on cryptocurrencies and their disruptive aspects. And now we have AI. I think the AI aspect, and the way we use artificial intelligence within MarketReader, is that it’s relatively easy to do things that you couldn’t do otherwise.
So it’s a big leap. And whether it’s next week, next month, or next year, it’s going to affect a huge amount of jobs. It’s hard to say exactly when. However, this has significant implications for many companies. Therefore, I think it is difficult to say that there is an AI bubble. This is so big compared to what happened in the bubble-like phases of the past that for me it’s much more real and much harder to go away.
And I think you’re pretty young. If you look at how long this has been going on, it’s only been a few months that this has really had a very positive impact on the stock price. So I find it very difficult to say that this is overkill. I think this will have a big impact on the global economy, especially the US stock market, where many companies are based, which is the true heart of this technology.
– However, as you said, it’s still early days. Therefore, it is unclear how quickly that will be reflected in earnings. We are still in the spending cycle here. But if you zoom out a bit and look at the resilience of the market this year with stocks around, wow, it’s a nine-month high. And then you see how much the AI wave and the big tech wave contributed to that. Are you thinking about the sustainability of the bull market, especially in light of the debt ceiling, the Fed cycle, and whatever else they’re throwing at the market?
Jens Nordwig: So I think we’re going to see a lot more divergence in the market than we’ve seen in the past. I think this technology has a very deep meaning. There will be big losers and big winners to a degree that has probably never been seen with previous technologies. The entire service sector is really impacted by this technology. In the past, the disruptors were actually more in other sectors than in services. So this will have a big impact.
But back to what we talked about in the previous segment. Interest rates are moving behind the scenes. AI isn’t everything. There is an inflation problem that the Fed is still dealing with. Interest rates are rising. Potentially, more volatility will push the yield curve down again. It’s not just the level of the yield curve. That’s also when people really start to worry about how far-reaching the potential consequences are, and then the market panics. That’s what we saw in September and October.
I’m worried that there will be similar episodes again. It doesn’t have much of an impact on Microsoft. We all know Microsoft is doing okay, and other players are very central to this AI theory. But for other players who actually need borrowing and interest rates matter, it could be a big drag.
– I’d like to go back to MarketReader for a bit. Because I am curious. You said you are using AI. I know I have Exante and I have the MarketReader reader. How does it work?
Jens Nordwig: So the way we used MarketReader is that when there is a big shock to the system, for example the Silicon Valley bank shock, we use MarketReader technology to literally scan the entire stock market and through AI technology everything You can check the brands of And summarize the important things and deliver them to humans.
That’s why there are so many banks in the US. If you’re tracking 300 or 400 banks at once, MarketReader technology will help you a lot. And it was very helpful when an unfamiliar name appeared on the screen. We all know how to follow JP Morgan news. But for these smaller banks, this technology can be very useful.
And what we did is combine AI technology with more structural models. So we’re not just letting AI technology run wild. But what I find very powerful is the combination of traditional structural models and AI.
– So what did AI tell us in such an event, and how can we do predictive analytics for such future events as well?
Jens Nordwig: Well, I think that night when the Silicon Valley Bank news started coming out, our system immediately flagged, OK, there was indeed a spillover to First Republic Bank. There was literally never a First Republic Bank on screen. However, we were immediately warned. There are several other banks that are making very dramatic moves. So you will be able to follow these major banks very closely. Literally like 24 hours a day people like institutional investors have been asking me. “Okay, why is Bank of America so volatile?”
And on Friday, the following day, a trustee was appointed. So actually at least he got a 24 hour lead. So it helped me a lot at the time.
– As for commercial real estate, what have AI tools taught us about it? Because it is considered the next shoe to drop.
Jens Nordwig: Therefore, this tool can be used in any field. With some durables news this week, we can take a quick look across the sector. So how we use the tools and what areas we focus on changes every week.
– have understood. I’ll continue this discussion later, so I’ll put a pin here. Jens Nordvig, Founder and CEO of Exante Data and Co-Founder and CEO of MarketReader, said:
