Investor enthusiasm for artificial intelligence has significantly contributed to the stock market’s 39% increase over the past year, according to the S&P 500 index. Nvidia, a leading provider of semiconductors for AI applications, experienced a more than threefold rise in its stock price during this period.
Some experts, such as Harvard economist Larry Summers, regard AI as being as transformative as the Industrial Revolution. Speaking at Fortune’s Innovation Forum, Summers stated that AI could potentially replace almost all forms of human labor, explaining that AI would likely first replace complex tasks like difficult medical diagnoses before taking on more personal roles, such as a nurse comforting a patient.
However, not all analysts are convinced of AI’s immediate impact. Jim Covello, head of global equity research at Goldman Sachs, expressed skepticism about AI’s current cost-effectiveness in a Goldman podcast. Although trillions are being invested in AI infrastructure, Covello questioned the immediate value, noting that this is unlike previous technological transitions where cheaper solutions replaced costly ones. He advised those interested in AI investments to focus on infrastructure provider stocks.
Investment legend Jeremy Grantham, co-founder of GMO, holds a different perspective. Grantham acknowledges AI’s long-term significance but believes AI stocks are currently overvalued. In an interview with Morningstar, he compared the market’s response to AI with past technological developments, suggesting that while market euphoria often leads to short-term overvaluation and subsequent crashes, transformational technologies eventually reshape the world.
Grantham, a noted investment strategist with a history of accurately predicting market trends, expects foreign stocks to surpass U.S. stocks in performance over the next decade, following a period of underperformance. He cited historical patterns of rotation between the performance of U.S. and foreign stocks.
