According to a recent report titled “Global Equity Views 1Q 2024” from J.P. Morgan Asset Management, the hype surrounding artificial intelligence (AI) technologies is expected to wane in 2024, leading to what the firm has dubbed an “AI Autumn.” This phenomenon could result in a quieter year for the big tech giants that have recently dominated the market, driven by the AI frenzy.
According to the report, while global corporate earnings are expected to grow around 10% in 2024, the recent market rally and soaring valuations have already incorporated much of this anticipated growth, particularly for the top-performing AI-driven companies. As a result, the report urges caution towards these “big AI winners” of 2023, advocating for a rebalancing towards high-quality stocks and diversification across sectors.
“AI Autumn” Could Lead to a Queiter Year for Big Tech in 2024
The note states that a significant shift in monetary policy expectations triggered a remarkable market rally towards the end of 2023, with the MSCI World Index experiencing one of its best two-month returns in 50 years. Cyclical stocks thrived in this environment, rewarding investors who embraced risk. However, the phenomenon dubbed “AI Autumn” might dampen the enthusiasm surrounding generative artificial intelligence technologies, marking a potential slowdown in the market momentum that propelled tech giants to new heights.
While global corporate earnings are anticipated to grow around 10% in 2024, following two years of stagnation, the recent market rally and soaring valuations have already incorporated much of this expected growth, particularly for the top AI-driven companies. Portfolio managers are urging caution towards these “big AI winners” of 2023, advocating for a rebalancing towards high-quality stocks and diversification across sectors.
The tech sector faces a complex outlook, with excitement about generative AI’s potential tempered by near-term frustrations over slower-than-expected progress. The stock market’s concentration is at its highest level in 50 years, partly due to the AI frenzy, suggesting an opportunity for a broader distribution of investment opportunities.
While the “AI Autumn” could lead to a quieter year for big tech stocks in 2024, the note says the long-term potential of AI and technology remains promising.
Magnificent Seven’s Weight in the S&P 500 Index
The Magnificent Seven comprise over 28% of the S&P 500 Index and are responsible for approximately 65% of the S&P 500 Index’s year-to-date returns. The market concentration is seen as concerning by some investors as the index largely becomes dependent on the performance of seven major companies, pulling away from diversification for the investor.
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Disclaimer: Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
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