It\u2019s hard to overstate how obsessed investors were on this issue. At one point last summer, chipmaker Nvidia\u2019s results day was considered on a par with the monthly US jobs report<\/a> \u2014 the biggest beast of the global economic data calendar \u2014 for its role in setting market direction and maintaining the upward momentum in stocks.<\/p>\n Quarter after quarter, Nvidia\u2019s earnings knocked it out of the park and its share price fizzed higher. <\/p>\n Now we are in a new phase. Nvidia put out earnings numbers this week, and again they beat expectations, but the market largely shrugged, suggesting we have finally passed peak excitement over this one enormous company. And we face a different question \u2014 not whether the technology is good enough, but whether it\u2019s too good, to the point where maybe lots of jobs and companies will soon just not need to exist.<\/p>\n Even Nvidia\u2019s bumper earnings<\/a> in the final quarter of last year, and its expectation for some $78bn in earnings in the current quarter, could not liven up US stocks from a very wobbly patch, with the valuation of some companies hit hard by the fear that AI could seriously compromise their business models.<\/p>\n Software stocks have taken a particularly harsh beating and fears are stirring up from an unusual source in the form of a blog post<\/a> from a relatively obscure outfit called Citrini Research. This rumbled stocks when it sketched out an imagined vision of the future where AI has led to mass unemployment and monstered the markets.<\/p>\n Citrini could be right. It could be wrong. Lots of the finance industry thinks it\u2019s the latter. \u201cSuccessive waves of technological change have not produced runaway exponential growth, nor have they rendered labour obsolete,\u201d noted Citadel Securities\u2019 Frank Flight in a rather pointed blog<\/a> that mirrored and picked apart the Citrini argument.<\/p>\n But that\u2019s not really the point. The issue is that investors have found themselves sitting in a stock market that has crammed money into a rather narrow, very US-focused AI trade, and they\u2019re now having doubts over whether they have rewarded the right companies, in the right country, doing the right stuff, and what the ramifications of the technology really are.<\/p>\n \u201cA market that moves 3 per cent on a blog is a market that does not know,\u201d said Helen Jewell, international chief investment officer for fundamental equities at BlackRock. In response, she said, investors are having a rethink. \u201cHow do I make sure my portfolio is not too exposed to any factor, geography or risk?\u201d she said. The only answer, boring as it sounds, is to diversify.<\/p>\n That line of thinking is one of the reasons why we are seeing the benchmark S&P 500 index of US stocks, heavily weighted towards AI heavy hitters with large market capitalisations, stuck in a rut. In contrast, a version of that same index where stocks are equally weighted regardless of size is still pushing higher. On top of all the political stress in the US, it\u2019s also one of the reasons why European and Asian stocks are performing so much better than their US peers this year.<\/p>\n Recommended<\/p>\n
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