Emphasis on Artificial Intelligence Declines in Corporate Earnings Reports:
Discussion of “artificial intelligence”—a term central to rapid and significant gains in technology stocks—has diminished,
raising questions about the true benefits of this technology that investors may have already factored in.
Content:
Decline in Mentioning Artificial Intelligence
The Impact of Artificial Intelligence on Productivity
Adoption of Technological Advancements
Impact of Artificial Intelligence on Stocks
The Upcoming Crucial Evaluation of Artificial Intelligence’s Role
Decline in Mentioning Artificial Intelligence
This term’s mentions have sharply decreased in the most recent earnings season compared to the previous four seasons,
according to a Bloomberg analysis of earnings call transcripts from the S&P 500, Nasdaq 100, and Stoxx Europe 600 companies.
Over 80% of these companies have reported their results so far.
This decrease in usage might indicate that companies have become more conservative,
while some analysts believe that expectations for a comprehensive productivity explosion due to artificial intelligence are premature.
AI-related stocks have continued to lead the rise in U.S. stock markets this year,
but this earnings season has shown that convincing investors has become more challenging.
The Impact of Artificial Intelligence on Productivity
Bhanu Baweja, chief analyst at UBS, said,
“I have not yet seen the great productivity miracle that artificial intelligence could bring.
When I ask analysts outside the technology sector whether AI has significantly changed their cost or revenue projections,
many deny it, indicating that developments are evolutionary, not revolutionary.”
Bank of America analysts, led by Sebastian Raedler, are also skeptical.
At the beginning of the season, they noted that significant productivity gains expected from AI
were already priced into U.S. stock prices, with the equity risk premium
additional returns expected by investors over risk-free assets like U.S. Treasuries—at a twenty-year low.
Adoption of Technological Advancements
Raedler wrote, “The market has decided to interpret this as a structural improvement, not a cyclical recovery.
The widespread adoption of technological advances and their economic benefits takes time,
and thus, expecting to see the benefits of this technology just two years after AI
entered public consciousness might be overly hasty.”
The main question remains: Has the market reached the beginning of a productivity boom led by artificial intelligence
that could further reduce the equity risk premium, similar to the dot-com boom that enhanced U.S. productivity in 1999-2000?
Impact of Artificial Intelligence on Stocks
Nevertheless, artificial intelligence has had a significant impact on the stock market,
with a Goldman Sachs basket of AI-beneficiary stocks rising 22% this year,
both the Nasdaq 100 and the Philadelphia Semiconductor SOX Index.
However, investors have also experienced moments of anxiety.
Meta Platforms triggered a $400 billion sell-off in technology stocks after failing
to convince the market of its ability to monetize AI effectively,
reminding investors of the high costs associated with entering this field for many large-cap tech companies.
Similarly, shares of chip designer Arm Holdings dropped after announcing modest revenue forecasts for the fiscal year,
raising concerns about a slowdown in AI spending.
The Upcoming Crucial Evaluation of Artificial Intelligence’s Role
The upcoming earnings report from Nvidia, scheduled for May 22, will be a significant test.
As a leading symbol of the AI hype, expectations for Nvidia are high and increasing.
The stock has surged over 80% this year, and with no sell ratings and 61 buy-equivalents,
analysts predict a further 12% increase in the average price target.
Emphasis on Artificial Intelligence Declines in Corporate Earnings