by Bryan Perry

January 30, 2024

After such a strong (+19%) move higher in the past three months, many professional investors are asking what keeps this market rising. First off, it is key economic data and bullish forward sales and earnings guidance that comes in at, or better than, Wall Street forecasts. Of the stocks that make up the Magnificent Seven, only Tesla Inc. (TSLA) has reported quarterly results that miss on both the top and bottom line, while providing opaque guidance, with the stock trading down on the news .

Based on Wall Street estimates, it appears the other six Mag-7 companies will post strong results. As to whether they will satisfy the Street wholly depends on forward guidance. One would think that there will be a replacement in the Mag-7 for Mr. Musk’s EV company, of which there are a couple of heavyweights that come to mind, but again, we’ll see which company occupies that slot after this earnings season ends.

U.S. stocks traded to new record highs last week as stronger-than-forecast Q4 earnings were posted by a few mega-cap tech stocks, coupled with continuing investor optimism surrounding artificial intelligence.

There is a growing belief that the amazing demand for AI chips from the hyper-scalers is just the beginning of a multi-year transformation of nearly every industry in the economy. This growing bullish sentiment surrounding AI is, in my view, legitimate, supported by emerging data regarding its application.

Some argue that AI is a bigger transformation than the internet itself, because it can affect every aspect of human life and society, from health care to education to entertainment. Others contend that the internet is still more transformative because it enabled the global connectivity and information access that made AI possible in the first place. But there is little argument that the application of AI on businesses will have huge positive impacts on productivity and efficiency while being enormously accretive to global GDP.

According to estimates by McKinsey (What works for digital and AI transformations?): “AI could add up to $13 trillion to the global economy by 2030, which is comparable to the impact of the internet in the past two decades. AI could also boost productivity by up to 40 percent, and generate up to $9 trillion in annual value from innovation. However, AI also poses significant challenges and risks, such as ethical dilemmas, job displacement, and security threats, that require careful governance and regulation.”

Private Investment in Artificial Intelligence Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

When I typed, “What will AI bring to businesses?” into ChatGPT, this is the answer it gave me:

Artificial intelligence (AI) is transforming businesses in many ways, such as improving efficiency, productivity, customer service, cybersecurity, fraud management, and content production. AI can also help businesses make better decisions, reach larger audiences, and customize their offerings.

Here are some examples of how AI is used in different business domains:

  • Customer service: AI-powered chatbots can provide instant and personalized responses to customers’ queries, reducing the need for human agents and increasing customer satisfaction. AI can also analyze customer feedback and behavior to improve products and services.
  • Cybersecurity and fraud management: AI can detect and prevent cyberattacks, malware, phishing, and other threats by analyzing large amounts of data and identifying patterns and anomalies. AI can also help businesses verify identities, authenticate transactions, and monitor fraud risks.
  • Content production: AI can generate high-quality and engaging content for various purposes, such as marketing, internal communications, product descriptions, and social media posts. AI can also translate content into different languages and optimize it for search engines and audiences.
  • Inventory management: AI can optimize inventory levels, reduce waste, and increase sales by forecasting demand, managing supply chains, and recommending products. AI can also automate tasks such as ordering, tracking, and replenishing inventory.
  • Recruitment and talent sourcing: AI can help businesses find and hire the best candidates by screening resumes, conducting interviews, and assessing skills and fit. AI can also improve employee retention, performance, and satisfaction by providing feedback, training, and career development opportunities.
  • Machine learning (ML) is a branch of AI that enables machines to learn from data and improve their performance without explicit programming. ML can be used for tasks such as predictive maintenance, quality assurance, process optimization, and generative design.
  • Deep learning (DL) is a subset of ML that uses artificial neural networks to model complex patterns and relationships in data. DL can be used for tasks such as image recognition, natural language processing, speech recognition, and computer vision.
  • Reinforcement learning (RL) is a type of ML that trains machines to learn from their own actions and feedback. RL can be used for tasks such as robotics, self-driving cars, and game playing.

Machine Learning Artificial Intelligence Choice Image

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The greatest and most impactful changes will be created from Machine Learning (ML) AI.

According to Next Move Strategy Consulting, the market for artificial intelligence is expected to show strong growth in the coming decade. Its value of nearly $100 billion is expected to grow 20-fold by 2030.

Artificial Intelligence Market Size Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The AI market covers a vast number of industries, everything from supply chains, marketing, product making, research, analysis, and fields that will in some aspect adopt AI within their business structures.

To summarize, the rally to new highs for the Dow, S&P and Nasdaq is supported by the Fed being done with rate hikes, inflation trending lower, capex spending expected to rise this year, improving consumer sentiment, a presidential election year, and the widening optimism and understanding of what AI means to future corporate revenue and earnings growth. While there might be market corrections stemming from geopolitical and financial risks that make headlines every day, the future of AI is clearly vast.

The AI-led rally of 2023 is still leading the market in 2024, and many leading AI stocks have enjoyed big moves higher. Any major market pullbacks will create buying opportunities in what looks to be a multi-year massive spending cycle on AI technology. Anyone who missed out on fortunes made from internet stocks may have a fantastic opportunity to cash in on the exponential growth of AI going forward.

Navellier & Associates, A few clients own Tesla (TSLA), per client request in managed accounts.  Bryan Perry does not own Tesla (TSLA), personally.

All content above represents the opinion of Bryan Perry of Navellier & Associates, Inc.

Please see important disclosures below.

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About The Author

Bryan Perry

Bryan Perry

Bryan Perry is a Senior Director with Navellier Private Client Group, advising and facilitating high net worth investors in the pursuit of their financial goals.

Bryan’s financial services career spanning the past three decades includes over 20 years of wealth management experience with Wall Street firms that include Bear Stearns, Lehman Brothers and Paine Webber, working with both retail and institutional clients. Bryan earned a B.A. in Political Science from Virginia Polytechnic Institute & State University and currently holds a Series 65 license. All content of “Income Mail” represents the opinion of Bryan Perry

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