Artificial Intelligence Facilitates Confidence In US Stock Market

Recent developments in artificial intelligence are raising hopes for future business operations that will be more productive. They are also giving the stock market a significant boost. A few of the index’s largest stocks, many of which are at the centre of the AI frenzy that has spread in the wake of chatbot sensation ChatGPT, have been the primary drivers of the S&P 500’s (.SPX) 9% rally this year.

According to Jessica Rabe, co-founder of DataTrek Research, five stocks—Microsoft (MSFT.O), Google parent Alphabet (GOOGL.O), Nvidia (NVDA.O), Apple (AAPL.O), and Meta Platforms (META.O)—have generated the entire year-to-date return for the S&P 500. She particularly mentioned that about 20-50% of the gains are a result of the buzz around artificial intelligence.

A recent Societe Generale analysis focused on 20 stocks that are heavily held by exchange-traded funds that are related to artificial intelligence (AI), whose total assets under management have increased by almost 40% this year.

As per SocGen’s analysis, excluding those stocks from the S&P 500 would result in a roughly 10% decline in the index’s performance, putting stocks in the red for the year.

According to Manish Kabra, head of US equity strategy at SocGen, the strongest returns are being obtained by the stocks that are AI-driven. Analysts are licking their lips at the profit potential that will result from new revenue opportunities and productivity improvements due to the flurry of AI developments.

Goldman Sachs strategists believe that in the ten years following widespread adoption, productivity gains brought on by generative AI could increase profit margins for S&P 500 companies by about 4 percentage points.

Confidence in the stock market facing many challenges is supported in large part by AI. These include concerns that the United States Congress won’t reach a consensus to raise the debt ceiling and prevent a default as well as concerns that the economy may be heading for a downturn as a result of the Federal Reserve’s interest rate hikes.