The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) fell from all-time highs on Thursday as investors began to pull out of big technology companies and broaden their investment horizon. Is this just a modest drop from all-time highs or a sign of things to come?
Cory Johnson, Chief Market Strategist at Futurum Group, joins Market Domination to provide insights on AI investing and the earnings outlook for major technology companies.
“I think there’s some anxiety among investors who’ve flocked to AI stocks, particularly Nvidia (NVDA), about valuation, growth, and short-term stock price volatility. And what’s going to slow that sell-off,” Johnson told Yahoo Finance. “And it’s true. [the] Inflation Rates and the Fed’s Response [Federal Reserve] Clearly we want to reduce [interest rates]I guess that’s what I learned. [Chair] Jerome Powell said this week he wants to cut back.”
For more expert insights and the latest market trends, click here to watch this entire episode of Market Domination.
This post Nicholas Jacobino
Video Transcript
The S&P 500 Nasdaq index has fallen from record lows as investors pulled out of big technology companies, and the decline comes after inflation slowed further in June.
So what does this mean for tech winners like NVIDIA and Microsoft? Corey Johnson, chief market strategist at Futura Group, is here to tell us.
Corey.
Nice to meet you as always.
So one of the questions that Josh and I have been discussing all day and that we reiterated at the beginning of the show is, we’re seeing a big pullback in yields, is this just a one-day fluctuation or is this the start of a larger rotation?
What do you think?
Well, I think there is some unease among investors who have flocked to AI stocks, especially the video, about growth valuations and short-term stock price fluctuations.
And what will fuel those sales?
And is it, in fact, a change in the inflation rate and a response from the Fed, which clearly wants to cut rates?
I guess the lesson I took away from Jerome Paul this week was that he wants to be cut.
And the inflation data available today may give him enough leeway to start cutting rates.
And will it change the fundamental environment in which AI stocks have risen?
So it doesn’t rise as much.
And so the Goldman Sachs memo might be off the table a little bit because I think it was very widely discussed and circulated across Wall Street during an otherwise mundane week.
If you think about it, if we invest $1 trillion in AI, when will we see that $1 trillion return to our businesses and our economy?
Uh, Corey.
Well, it’s interesting that you bring up the Goldman Sachs note, I’m glad you did.
I found it to be truly thought-provoking.
I am here to help.
And one of the data points, among others, that’s highlighted in the memo is the number and percentage of U.S. companies.
This includes companies of all sizes that are using or seeking to use AI in their day-to-day operations, but there are not many of them, and even among computing companies, there are only a few.
So do you think the concern is justified that we’re putting all this investment into AI and when will it bear fruit?
Well, we’ve done surveys and group polls on fur, we’ve done polls of corporate customers who talk about this very issue, and they say they want to spend money, and they’re going to spend more and more.
But I think they’re still figuring out what to do with AI and where in the process it can help.
But I think Goldman Sachs, again, is very thought-provoking.
But I think one of the errors in the negative criticism in the memo is that what we do in computing today is what we will do in AI-driven computing in the future.
And I think that’s wrong.
It’s hard to imagine what we’ll be doing with AII at Semicon West this week – it’s the big conference for semiconductor manufacturing, bringing together all the big companies that make semiconductors of all kinds, and most interestingly, a lot of the smaller companies.
There was also a lot of discussion about AI being a process changer rather than a demand driver.
How can we change the plumbing, can we literally fix the plumbing?
How can we change how we use water and how can we change our staff by taking that data and using AI to process it in ways that were previously not time-efficient?
In other words, AI can tell us what will break in ways we never thought possible, so we fix things before they break.
In other words, it takes too long to calculate.
Some of this is possible with AI.
They may not be sexy things we’ve never done before, like writing a term paper or chatting to a GP.
Some of them will be easy to understand, but some of them will be weird and unusual and things you’ve never done before.
And that’s where I think the changes in revenue, profits and GDP that will ultimately be hurt by AI will come from.
We don’t know what that is at this point.
