Wall Street is wondering whether the U.S. economy will remain resilient despite the Federal Reserve's aggressive interest rate hikes, with some predicting a recession soon.
But Steve Eisman, a senior portfolio manager at Neuberger Berman, is a financial-market bullish man who thinks the answer is clear: The race for artificial intelligence and expanding infrastructure projects are driving the economy, and the doomsayers are wrong.
“I think the only conclusion is that we're just hanging in there and the U.S. economy is running stronger than it's ever been in history,” he told CNBC on Thursday.
Eisman made famous bets on bad mortgages that led to the financial crisis. The Big ShortHe added that the next stage in the technology story will be for consumers to buy new AI-enabled phones and laptops.
That means Apple, which just announced a series of new AI features, will likely go through a major refresh cycle as customers upgrade their iPhones, he predicted.
Eisman added that his firm has begun researching what other stocks could benefit from the AI trend, but he urged investors to stick with their Apple holdings.
“Apple's position should absolutely be maintained,” he said. “Apple is too central to this whole story.”
Microsoft and Google's parent company Alphabet, which each develops AI technologies, are also “core holdings,” but Eisman also raised questions he is trying to answer.
One intriguing hypothesis is that if AI is as successful as people hope it will be, the costs of software development will “explode,” suggesting the competitive advantage held by some companies will no longer be so imposing, he said.
“So while hardware will continue to be revalued, it can also be argued that some software will become less valuable,” he added.
In other words, tech hardware companies supplying the AI sector should continue to thrive, but software stocks should see less of a boom.
Nvidia's big stock price rise symbolizes the recent shift to hardware stocks. The AI chip leader's shares have soared 166% so far this year and are up more than 200% from this time a year ago, making it a $3 trillion company and accounting for more than a third of the S&P 500's gains this year.
And Nvidia's quarterly earnings report shows no signs that the rush to stock up on AI chips is slowing.
But relying too heavily on one stock carries big risks, warned Torsten Slok, chief economist at Apollo.
“Such high concentration means things will be good if NVIDIA continues to rise,” he wrote in a note on Wednesday, “but if the company starts to decline, the S&P 500 will take a big hit.”
This story originally appeared on Fortune.com.
