The US stock market has been receiving a boost from artificial intelligence (AI), according to a report in Economic Times. Megacap stocks, including Microsoft, Google parent Alphabet, Nvidia, Apple, and Meta platforms, have delivered most of the S&P 500’s year-to-date return of 9%. Analysts estimate that about 25% to 50% of these gains are due to optimism around AI, which is viewed as a major driver of future productivity and profit.
AI: The Future of Productivity and Profit
Experts in the field believe that AI will play a significant role in driving future productivity and profit. Generative AI, in particular, is seen as capable of producing margin-expanding productivity gains. As a result, the top-performing companies in the US are investing heavily in AI.
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The Center of the AI Frenzy
Microsoft, Google parent Alphabet, Nvidia, Apple, and Meta Platforms are at the center of the AI frenzy that has spread across the US stock market, particularly after the chatbot sensation ChatGPT. These five mega-cap stocks alone are responsible for the S&P 500’s entire year-to-date return.
Impact of AI-Related ETFs
A recent analysis by Societe Generale focused on 20 stocks widely owned by AI-related exchange-traded funds (ETFs). According to their findings, removing these stocks from the S&P 500 would reduce the index’s performance by roughly 10 percentage points, putting stocks in negative territory for the year.
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Generative AI’s Potential for Profit Margins
Goldman Sachs strategists estimate that generative AI could create productivity gains that result in S&P 500 companies expanding profit margins by about 4 percentage points in a decade following widespread adoption.
Recently OpenAI, the maker of ChatGPT, raised funding of $300 million with a valuation of around $29 billion. Considering the growth potential of major AI firms, investors are very optimistic about these companies.
Our Say
AI is proving to be a game-changer for the US stock market. Leading the way are mega-cap stocks like Microsoft, Google parent Alphabet, Nvidia, Apple, and Meta Platforms. Generative AI’s vast potential for productivity gains and profit margins convince experts that AI will drive stocks to new heights. The recent funding news from OpenAI raises even more optimism about the future of AI in the US stock market.
Sabreena Basheer is an architect-turned-writer who's passionate about documenting anything that interests her. She's currently exploring the world of AI and Data Science as a Content Manager at Analytics Vidhya.
