It seems obvious that the spread of ever more advanced AI models will affect the entire economy. Even so, betting now on who the winners and losers of this shift will be is not a good idea.
Another milestone for Nvidia's stock: in April, the chip developer became the first company in the world to reach a market capitalization of more than 5 trillion US dollars. And in doing so, it once again helped push the benchmark US index, the S&P 500, to a new record high.
Strong demand for AI chips and massive investments in data centers keep giving the markets fresh momentum. But not always in the same direction. Just a few weeks earlier, the dominant worry had been that American tech giants might be betting too much money on AI. In this year alone, Alphabet, Amazon, Meta and Microsoft plan to invest a combined total of more than 650 billion dollars in AI infrastructure. And of course, there is no way of knowing in advance whether those investments will pay off.
More productivity, but fewer producers?
The impact of these heavy AI investments is already leaving its mark in the strong growth of US GDP. And that is said to be just the beginning. Because the potential of AI touches not only the technology sector but, more or less, the entire economy. Not just in the US, but all over the world.
German GDP growth could be, on average, 0.8 percentage points higher each year over the next 15 years thanks to AI, the Institut für Arbeitsmarkt- und Berufsforschung forecast last November. Hopes for productivity gains are high, even if those gains still have to materialize. In the pharmaceutical industry, for example, the expensive research and development phase for medicines could be significantly shortened. Whether in the financial sector, in retail or in mechanical engineering: in almost every branch of the economy, AI could make many processes more efficient.
On the other hand, the advances in AI are not a win for everyone. In February, a new buzzword made the rounds on Wall Street: the so-called „AI Scare Trade“. Speculation spread that AI could undermine numerous business models. The wave swept over more and more sectors – from software providers to real estate service firms to insurers. As a possible consequence of the spread of AI, there are also repeated warnings of large-scale job losses – with far-reaching effects on the economy.
AI: job killer or the trigger for a startup boom?
That said, there are also forecasts suggesting that AI could create more jobs than it destroys. Torsten Slok, chief economist at the American investment firm Apollo, recently pointed to the so-called „Jevons Paradox“. In the mid-19th century, William Stanley Jevons observed that when steam engines increased the efficiency of coal burning, England did not use less coal, but more. Technical progress allowed the raw material to be used more effectively. But that led to higher demand for the raw material, rather than reducing it.
Whether it is contract drafting by lawyers or auditing: using AI tools can lower the cost of „knowledge work“. „Let's call it the Jevons employment effect,“ Slok writes in a short analysis. When the cost of skilled work falls, the potential market expands, and the total number of companies and workers in this field grows. „That also includes startups founded by fresh college graduates who can now compete with established companies on certain tasks.“ This is probably the reason why the unemployment rate among young workers is currently falling more sharply, and why the number of new companies founded each week is at the highest level in US history.
Forecasts: no foundation for investing
Whether Slok is right about his assumption over the medium to long term remains an open question. Just like the question of which companies will be among the future winners or losers. You simply cannot rely on forecasts. Whether they come from human experts or from an AI.
„Nobody knows the key decisions before they have been made – for example by companies, by consumers or by policymakers,“ explains Philipp Dobbert, our chief economist and head of asset management. „With some developments we don't know how they will unfold, and with some we know absolutely nothing in advance.“
What's more: many things can play a role in share prices. The spread of AI is not the only thing that moves them. „Mono-causal explanations for trends on the stock markets very often come to nothing,“ Dobbert stresses. „You can always find plenty of reasons for how prices develop.“
Diversification instead of speculation
When it comes to your investment strategy, it is better to steer clear of speculation and forecasts. Because all they do is bring unnecessary risk into your portfolio. The more selectively you bet on particular stocks, sectors or countries, the greater the chance of getting it wrong. The more broadly you diversify, the greater the chance of having the winners in your portfolio.
The global ETF portfolio from quirion is diversified according to scientific criteria. The goal: to optimize the balance between return opportunities and risk. That way, investment success is not a matter of chance, but rests on a system.
If you want to learn more about efficient investing, you can also ask our own AI chatbot. Because we have trained it to help users get closer to their personal investment goals.
Try quirion.Ai right here.
