Wall Street is questioning the continued resilience of the US economy in the face of aggressive rate hikes from the Federal Reserve, with some still expecting a recession to come.
But Steve Eisman, senior portfolio manager at Neuberger Berman, is optimistic about financial markets and thinks the answer is clear: The pessimists are wrong, because the race for artificial intelligence and the development of infrastructure projects stimulate the economy.
“We are coming out of this, and I think the only conclusion we can draw is that the American economy is more dynamic than it has ever been in its history,” he said. he adds. he told CNBC on Thursday.
Eisman, whose famous bet against toxic mortgages that led to the Great Financial Crisis was described in The big shortadded that the next step in the technology narrative will be for consumers to purchase new AI-enabled phones and laptops.
This means Apple, which comes from revealed a series of new AI featureswill see a massive customer refresh cycle upgrade their iPhoneshe predicted.
Eisman added that his company had begun researching which other stocks would benefit from the AI trend, but argued that investors should stick with whatever Apple stocks they have.
“Definitely keep your position at Apple,” he said. “He’s too central a character in the whole story.”
Alphabet, parent company of Microsoft and Google, which develop separate AI technologies, are also “core holdings,” but Eisman also raised a question he attempted to answer.
One intriguing thesis posits that if AI is as successful as expected, then the cost of creating software will “implode,” implying that the competitive advantages some companies have will not be as impenetrable, he said.
“So it can be argued that the re-evaluation of the hardware will continue and that some parts of the software will degrade,” he added.
In other words, tech hardware companies that supply the AI sector should continue to thrive, but software stocks not so much.
Nvidia’s massive rally illustrates the recent shift toward hardware stocks. Shares of the AI chip leader have soared 166% in the year to date and more than 200% from the same period a year ago, making it a $3 trillion company this represents more than a third of the S&P 500’s gains this year.
And Nvidia quarterly results show no signs that the rush to supply AI chips is slowing down.
But relying so heavily on a single stock also poses a significant risk, warned Torsten Sløk, Apollo’s chief economist.
“Such a high concentration implies that if NVIDIA continues to grow, then everything will be fine,” he said. wrote in a note Wednesday. “But if it starts to fall, then the S&P 500 will be hit hard.”
