Artificial Intelligence (AI) is increasingly becoming a significant player in various sectors, including the economy and the market. A recent report from Nvidia, a leading tech company, underscores this point, highlighting the transformative potential of AI. Whether it’s personalized shopping, self-driving cars, or a broad array of robotics uses for health care, gaming, and finance, AI is set to become a factor in virtually everyone’s lives.
Nvidia’s AI Success
Nvidia’s impressive fiscal first-quarter earnings report has brought the impact of AI into sharp focus. The company is nearing a $1 trillion market valuation and is establishing clear leadership status both on Wall Street and in Silicon Valley. The success of Nvidia is largely driven by its leadership position in the AI chip-supplying business.
Steve Blitz, chief U.S. economist at TS Lombard, emphasizes that “AI is real, AI is not a fad and we’re only in the early innings.” While the impact of AI may not be immediately apparent in the short term, its influence over the next three to six years could be transformative and far-reaching.
The Future Impact of AI
AI’s potential impact extends beyond the obvious. It could lead to reduced demand for foreign labor, a “point of sale” effect where coding and creative writing can be done by machines instead of people, and a host of other activities. Products like OpenAI’s ChatGPT, a chatbot that converses with the user, are already showcasing the potential of AI.
However, the benefits of AI are not evenly distributed, and the technological benefits tend to spread slowly. Peter Boockvar, chief investment officer at Bleakley Advisory Group, points out that “The spillover and the benefits that the rest of the economy will derive from AI is a multiyear, multidecade process.”
The Uneven Impact of AI
While Nvidia has already seen the upside of AI, the broader market reaction has been underwhelming. The S&P 500 semiconductor index jumped 11.4%, but the broader Nasdaq Composite rose a more muted 1.7%. The S&P 500 was up about 0.9%, while the Dow Jones Industrial Average slipped more than 50 points.
Despite the excitement over AI, there are still concerns about an economic slowdown. Boockvar points out that “There are some serious holes in the economy that we can’t ignore here.” He also notes that if the AI craze cools, people will see that the underlying business trends of Microsoft, Google, and Amazon are clearly slowing.
The AI explosion has the potential to save the market and maybe even the economy. However, it’s important to remember that the benefits of AI are a multiyear, multidecade process. While companies like Nvidia are already reaping the benefits of AI, the broader market and economy are yet to see the full impact. The future of AI is promising, but it’s a future that will unfold gradually over time