Over 75% of investors are excited about tech stocks due to A.I., but less than half are willing to pay for its personal or business use.

Over 75% of investors are excited about tech stocks due to A.I., but less than half are willing to pay for its personal or business use.

The Nasdaq 100 and the Technological Boom

The stock market is witnessing an unprecedented surge in technology stocks, with the Nasdaq 100 reaching its best first-half performance in history. According to the latest Markets Live Pulse survey, 77% of respondents are planning to increase their exposure to technology stocks or maintain their current holdings over the next six months. This bullish sentiment has led to soaring market valuations and taken even seasoned professionals on Wall Street by surprise.

However, despite the optimism among survey participants, it seems they are not fully committed to the technology sector just yet. About half of them are unwilling to pay for AI tools to aid their personal or business activities. Additionally, most companies have no plans to utilize AI for trading or investing purposes. This presents a challenge for companies that have made significant investments in AI technologies, such as OpenAI Inc.’s ChatGPT, as generating profits from these investments in the near term proves to be difficult.

The Nasdaq 100 has experienced a remarkable 40% increase year-to-date, primarily driven by the likes of Apple Inc. and Microsoft Corp. These companies have capitalized on the growing demand for futuristic technology. As a result, the benchmark is currently trading at around 25 times estimated earnings, above its 10-year average of nearly 21. Corporate executives are also shifting their focus towards AI, with this earnings season seeing more discussions about AI and less concern about an impending recession.

Unlike the dot-com bubble of the 2000s, the current enthusiasm for AI is grounded in reality. There are already numerous practical applications of AI in various stages of development. Market leaders are actively introducing new AI products aimed at boosting corporate productivity. For example, Microsoft’s Copilot service integrates generative AI into its widely used Microsoft 365 software suite, enabling more efficient email composition, document summarization, and data analysis. The company plans to charge users $30 per month for this service. Alphabet Inc., on the other hand, is integrating AI features into its Workspace apps, including Gmail and Google Docs. The company is also exploring AI-powered tools for advertisers and news organizations.

Among the companies reaping the benefits of the AI frenzy, Nvidia Corp. stands out. Its processors are widely used in computers that power AI applications, leading to a staggering 200% surge in its stock price this year alone. Nvidia has become the first chipmaker to achieve a trillion-dollar market valuation. According to 29% of MLIV Pulse respondents, the company has the potential to become the second- to fourth-largest company globally within the next two years, up from its current ranking as the sixth-largest. Additionally, Adobe Inc. has been upgraded by Morgan Stanley due to the perceived impact of AI on its product offerings.

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Despite the increasing presence of AI in the workplace, a significant number of individuals remain skeptical about the technology’s ability to perform core aspects of their jobs within the next three years. While Goldman Sachs ANBLEs estimated that seven in ten US workers will see their jobs affected by AI, only a small fraction will be replaced by new technologies. The sectors most at risk include office and administrative support, as well as legal functions.

Looking ahead, with advancements in AI, robotics, and quantum computing, there is a belief that the US economy could experience a boom in productivity gains. Ed Yardeni, the president at Yardeni Research, has expressed confidence that the US could witness a “Roaring 2020s” akin to the prosperity of the 1920s.

The MLIV Pulse survey of Bloomberg News readers reveals that 56% of respondents anticipate better volatility-adjusted returns on US stocks compared to Treasuries over the next month. This figure has increased from 53% at the start of July, indicating a growing preference for stocks among investors.

In conclusion, the technology sector’s remarkable performance has generated excitement among investors, leading to increased exposure to technology stocks. While some remain cautious about fully embracing AI, the practical applications and potential productivity gains make it an enticing proposition for companies. The future looks bright for technology, and it will be interesting to see how the market and individual companies harness the power of AI in the coming years.

MLIV – Markets Live Pulse is a survey conducted by Bloomberg’s Markets Live team, which seeks to capture the pulse of Bloomberg News readers. The survey explores topics related to investment, market sentiment, and emerging trends.