Artificial intelligence stocks have become a hot new stock on Wall Street. For example, the stock price of chip designer Nvidia nearly tripled this year. The SG Rise of the Robots/AI Index, which tracks stocks in this sector, rose 2.5 times over the same period. Investment inflows into AI-driven exchange-traded funds surged 30%.
But all market research shows that the boom in popularity will eventually die down, even if the underlying business maintains its importance. Example: Web stock craze he crashed 20 years ago, but the internet is now the backbone of civilization.
Société Générale predicts the same fate will befall AI stocks, but the company has a strategy to avoid the worst possible plunge ahead and emerge with a solid holding in the sector.
A French investment firm warns of an upcoming “wave of AI regulation”. There is widespread debate in Washington and European capitals about adding rules to govern AI to prevent it from harming humans. Another possible problem, the magazine said, is “AI wash,” meaning stocks that try to profit from AI’s popularity and get deeply involved in artificial intelligence when they really aren’t.
A research report by SocGen’s head of U.S. equity strategy Manish Kabra found the impact of AI geeks on the market to be staggering. Excluding AI boom stocks would halve the Nasdaq Composite’s 35% gain this year, and the S&P 500’s 14% gain would slip into negative territory, he calculated.
What’s the best way to invest in AI? Kabra suggested investing in a wide range of AI-related stocks. Some of these stocks produce concept components such as software, while others benefit from it, such as airlines that can use AI to improve scheduling, route planning, and more.
Coincidentally, SocGen created the Rise of the Robots index and keeps it as a template for AI investors. Sure, the company is talking about its own product, but no fund provider has a license for it yet. The index includes 150 stocks from NVIDIA to Delta Air Lines.
Kabra noted that a Federal Reserve rate hike almost always triggers a recession, and recommended AI as a hedge against it, but some of its providers have proven to be very important to businesses, leading to a recession. But I’m assuming it’s okay.
Related article:
Goldman: Artificial intelligence will boost global GDP by 7%
Why the AI craze is eerily reminiscent of the dotcom era
AI Application ChatGPT Outperforms Stock Market, Study Says
Tags: AI, Artificial Intelligence, Federal Reserve, Nasdaq Composite, Recession, Regulation, S&P 500, SG Robot/AI Rise Index, Societe Generale, Technology
