AI is the sharemarket’s ‘new growth thing’

Citigroup strategist Scott Chronert says the first wave of artificial-intelligence breakthroughs lifted the stocks of companies like Nvidia that are at the centre of it all. The second will elevate the market at large.

It’s a familiar pattern for technological innovation, from nineteenth-century railroads to the development of the internet.

But when it comes to AI, Chronert sees it happening with relatively rapid speed: He says it may become ingrained in the operations of a wide range of businesses in as little as two years, boosting earnings with cost savings and productivity gains.

“What we think happens more broadly is an acceleration of a trend already underway, where the bulk of Corporate America is utilising the technology as a way of better managing their business on a real-time basis, which actually means less earnings volatility and probably even less cyclical volatility,” Chronert said in an interview.

“It gives the market in general a new growth thing, and we haven’t really had a new growth thing for some time,” he said.

The excitement about artificial intelligence was a key pillar of the US sharemarket’s rally this year, turning Nvidia into the best-performing stock in the S&P 500 Index as the share price tripled on the back of sales of its high-powered computer chips to companies investing in the technology.

“It gives the market in general a new growth thing, and we haven’t really had a new growth thing for some time.”

Citigroup strategist Scott Chronert

While the market’s gains stalled on concern about the scale of the run-up and further rate hikes from the Federal Reserve, the tech-heavy Nasdaq 100 Stock Index is still up some 37 per cent this year.

And on Monday, the S&P 500 was headed toward its first back-to-back gain this month, with Nvidia among the top drivers of the advance.