Bullish sentiments over the beneficial impact of artificial intelligence tools like ChatGPT on businesses gave the US stock market a rare push in the recent months, according to reports. The rally in several key stocks, which helped the S&P 500 index gain as much as 9 percent so far this year, was mainly driven by optimism that new technologies will increase the profitability of corporates.
Five Companies Account for Most of S&P Gains
According to a Reuters report, the stocks of Microsoft, Google parent Alphabet, Nvidia, Apple and Meta Platforms together accounted for the S&P 500's rally this year. Nearly 50 percent of the gains were due to the buzz around artificial intelligence, said Jessica Rabe, co-founder of DataTrek Research, according to the agency.
A report last week said that, according to Goldman Sachs, artificial intelligence may help S&P 500 companies increase their profits significantly in the next 10 years. "Over the next 10 years, AI could increase productivity by 1.5% per year. And that could increase S&P500 profits by 30% or more over the next decade," Goldman's senior strategist Ben Snider said, CNBC reported last week.
Separately, a recent Societe Generale analysis found that if some 20 stocks whose ownership is tied to AI-related exchange-traded funds were removed from S&P500, the index would rpeort a 40 percent drop this year. "It's the AI-driven stocks that are getting the strongest returns ... As a secular theme, for sure, it's attractive," the head of US equity strategy at SocGen said.
Following the emergence of ChatGPT, several other tech giants like Google, Meta and Amazon have also launched cutting edge AI tools. Companies around the world are projecting the large scale integration of AI tools into business strategies. The next few years will see more of this, leading to the replacement of human roles by AI, which will save billions of dollars in cost for companies.
Companies Cutting Jobs
For example on Thursday, reports said British Telecom was gearing up to slash more than 50,000 job over the next several years as it reshapes the business and as the impact of cutting edge AI technologies unravel. BT will end up slashing nearly 55,000 by 2030, which amounts to about 40 percent of the behemoth's workforce, the report said.
BT CEO Philip Jansen explained that at least 10,000 human roles will be directly replaced by AI, digitization and automation. He said artificial intelligence technology will help in delivering more seamless customer services. "We will be a beneficiary of AI unequivocally .... Our chatbot Amy deals with lots of customer queries already," he said.
The impact of the projected AI boom on stocks is evident in the way the shares of some companies rose. The shares of Microsoft rose a whopping 32 percent this year, while Nvidia's share price soared 110 percent this year. Also, the Global X Robotics & Artificial Intelligence ETF gained 30 percent this year.