The Rise of Generative-AI: A Market Rally
The launch of ChatGPT in late 2020 is believed to have sparked a market rally in the generative-AI sector, according to a report by Morgan Stanley. The report suggests that AI and its accompanying technology will have a transformative impact across various industries, making it one of the most significant investment themes in the next decade.
Key Points:
- The recent outperformance in the AI sector is not indicative of a bubble, as the historical pattern of pre-peak bubble returns does not align with the current AI index performance.
- A secular investment theme, such as AI, is a long-term trend that is not tied to market cycles.
- The market rally in generative-AI is assumed to have started with the launch of ChatGPT in December.
- While individual AI winners, like Nvidia, have seen significant gains, broader AI indices have only risen by about 50% and have not surpassed previous 2021 highs.
- The stickiness and breadth of AI diffusion differentiate it from previous hype cycles, making it a more sustainable trend.
The Impact of AI on the Economy
Goldman Sachs predicts that AI adoption will start to have a meaningful impact on the U.S. economy between 2025 and 2030.
Hot Take:
The market rally in generative-AI shows promising potential, especially with the stickiness and diffusion of AI technology. While individual AI winners have experienced significant gains, there is still room for broader AI indices to surpass previous highs. The transformative impact of AI on various industries, along with its projected impact on the economy, makes it an important long-term investment theme.
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