Why The ‘AI Bubble’ Label Is Misleading
Given the ubiquity of the "Magnificent 7" in market discourse, the prevalence of bear narratives predicated on extreme market concentration and the generalized hype around generative AI, it'd be easy to conclude that the US equity rally constitutes a hopelessly narrow tech bubble.
To be sure, that characterization isn't wrong. Not entirely, anyway, and maybe not at all.
The tables below, from Goldman, are simple: They show the composition of what counted as the third-best Q1 for the S&P 50
L1M best S&P 500 sector is Energy (+13% measured by XLE), and next is Basic Materials (+4%, XLB).
AI Bubble, huh? While the mag7 (or are we down to the mag1 now?) are propping up the indices, according to Indeed, job postings for Software Development and Information Design and Documentation are both down 28% since pre-pandemic, IT Operations and Helpdesk down 15%. You can head on over to hiringlab.org/data/ and click on the “Sectors” tab to get the chart. I think something’s not adding up here.
It’s not a bubble. AI will allow companies to cut staff and increase margins!
“ZURICH, April 5 (Reuters) – Artificial intelligence will lead to many companies employing fewer people in the next five years, staffing provider Adecco Group (ADEN.S), opens new tab said on Friday, in a new survey highlighting the upheaval AI will bring to the workplace.
Some 41% of senior executives expect to have smaller workforces because of AI technology, Adecco said in a report based on a survey of executives at 2,000 large companies worldwide.”