While the premise is believable, I expected a more researched and persuasive piece than 4 paragraphs of "Nvidia went up and there's a lot of AI hype, so the stock market rally must be all because of it".
"On its own, the price of Nvidia is responsible for an enormous slice of the stockmarket recovery. Since the end of November the firm’s market capitalisation has soared from under $400bn to $925bn—accounting for a fifth of the rally. Add Nvidia’s surge to the growing market capitalisations of the 13 other firms with ai exposure and a remarkable 73% of the broader rally is explained."
"In November the average price to current earnings multiple of an s&p 500 firm, excluding the 14 most exposed to ai, was around 27. As we went to press, the multiple had dipped to 26. Meanwhile, the average multiple of firms in our ai bucket had leapt from 43 to 77."
Not sure what you would expect - they just point to the fact that most of the rally is achieved through the 'AI' companies - the rest of the index is actually down, or mostly down. That's fact. What more do you want to be more persuasive ?
A more reasonable explanation is that there was an overcorrection in big tech valuations during the downturn a couple years ago (while they are all continuing to make record profits quarter after quarter), and now after layoffs and cost cutting the market is slowly normalizing in their favor.
And Google's rally corresponded to their very successful set of announcements in the AI space at Google IO (and also a profit expectation beat to be fair).
Yep. Like a neural network powered search engine, right?
> In zero interest rates you can instead make investor hype your product so they increase the share price, but it doesn't work forever.
As this article points out, investors believe.
They've already got that - it's those text snippets. They're quite unreliable, so a reliable one would be different of course.
But Google doesn't get paid to provide search results, they get paid to show ads you click on. It doesn't seem to me this is the same product as AI that shows you text summaries of search results.
Worse, if you mine all the content out of search results instead of making users click on them, why will people even make new webpages for you to show in the results?
I actually meant the neural ranking of results, and the selection of ads for result sets.
Nvidia's rise is much more directly tied to this.
By historical standards, current P/E ratios are extremely high - especially for companies of this size.
> [...], but it's not at all clear that their lead is going to stick long enough to turn it into anything
People are saying that since January, but here we are in July and GPT-4 is still the best model. While everybody is catching up, they have (1) the processes in place to come up with new ideas and get them working (2) a head-start of many months (note that GPT-4 was basically done in Sep 2022).
Six months is... not a long time. Nobody knows where this is going to be in a year, or two, or five.
Certainly true, but their stock price is goosed by their hype, which is "AI AI AI!!!"
At least that would be somehow entertaining.