AI continues to drive S&P 500, tech growth trends

Exante Data Inc. Founder and CEO Jens Nordvig discusses the emergence of AI, and its impact on the S&P 500 and the job market.

Video Transcript

- Well, the S&P 500 has seen gains of over 9% so far this year. The rise has been driven solely by SEVEN big tech names, including Apple, Microsoft, and Alphabet according to strategists at Bank of America Global Research.

And over the last 12 months, net income for Apple and Alphabet and Microsoft alone have total $222 billion. That equates to roughly 14% of profits earned by the S&P 500 in that time frame, according to data from S&P Global Market Intelligence.

So should the continued concentration in big tech be a cause for concern? Let's bring back in Jens Nordvig who is the Exante, excuse me, Data Inc. founder and CEO. So should that be a cause for concern that you have such a concentration of that growth or of that performance among the mega-cap tech players here?

JENS NORDVIG: So we have a very big theme playing out on the background associated with artificial intelligence. And we go through these phases in the market where there's something new that potentially is extremely disruptive and extremely beneficial to some players in the market.

We, obviously, had the so-called dotcom bubble that had a bubble elements. We had a period not long ago where a lot of people were extremely focused on crypto and disruptive aspects of that. And now, we have the AI. I think the aspect of AI and we use artificial intelligence within MarketReader is that it really can do stuff that you, otherwise, were not able to and relatively easily.

So it is a huge leap. And it is going to impact a huge amount of jobs, whether it's next week, or next month, or next year. It's hard to say what the specific timing is. But this is something that has profound implications for many companies. So I find it very hard to say, OK, we have a bubble going on in AI. It's too much because this is a huge thing like relative to what has been happening in these previous bubble-like phases, I think this feels like a much more real thing to me, much harder to fade.

And I think it's fairly young. If you look at how long has this been going on, we're really only talking about a couple of months where this has been impacting stocks very aggressively. So I think it's very hard to say that this is overdone. I think it's a huge impact on the global economy and specifically, the US equity market, where a lot of the companies that are really central to this technology are based.

- That said, as you said, it's early days. And so it's unclear how quickly it's going to feed through to the bottom line. We're still in a spending cycle here. But just to zoom out a little bit, when you look at the resilience of the market this year with stocks around, what, nine month highs or so. And we see how much the AI wave and big tech wave has contributed to that. Are you thinking about the sustainability of a rally, especially given debt ceiling, Fed cycle, whatever else we're going to throw at the market?

JENS NORDVIG: So I think we can see much more bifurcation in the market than we have been used to. I think this technology has such profound implications. There are going to be massive losers and massive winners to an extent that previous technology is probably did not see. The whole service sector is really impacted by this technology. In the past disruption were more other sectors really than the service sector. So this is going to have big implications.

But I will go back to what we talked about in the previous segment. Interest rates are working in the background. It's not all about AI. We have an inflation issue that the Fed is still dealing with. Interest rates are going up. Potentially, we're going to have more volatility and the yield curve again. It's not just the level of the yield curve. It's also when people really are getting worried about, OK, how wide are the potential outcomes, then the market freaks out. That's what we saw in September, October.

And I'm worried that we're going to have another episode like that. That's not going to impact Microsoft that much. Everybody knows Microsoft is going to be OK and other players that are very central to this AI thesis. But for other players that actually need to borrow and where the interest rates matter, it could be a huge drag.

- I want to come back to MarketReader for a second. Because I am curious. You said you guys use AI. I know you have Exante and then you have MarketReader reader. How does it work?

JENS NORDVIG: So the way we have used the MarketReader is when there's a big shock to the system, for example, the Silicon Valley Bank shock, we can use MarketReader technology to literally scan the entire equity market and look at every stock through an AI technology. And get the key things summarized and delivered to humans.

So we have a lot of banks in the US. If when I track like 300 or 400 banks in one go, the MarketReader technology can really help you do that. And it was tremendously helpful when we had names on the screen that we were not used to watching. Everybody knows how to follow the news on JP Morgan. But on these smaller banks, the technology is very helpful for them.

And what we've done is we combine the AI technology with more structural models. So it's not we're just letting the AI technology loose. But it's the combination of traditional structural models and AI that I think is very powerful.

- So in events like those, what did AI tell you? And how does that give us any predictive analytics, even about future events like that?

JENS NORDVIG: Well, I think on that night when the Silicon Valley Bank news started to come out, our system immediately flagged that, OK, there's actually a spillover to First Republic Bank. I literally never had First Republic Bank on my screen. But we were alerted immediately. There's a couple of other banks that are moving in a very dramatic way. So we could have those key banks tracked very carefully. Literally, like 24 hours, I still had like institutional investors that asked me, OK, how come Bank of America is moving so much?

And then on Friday, the day after, the receivership happened. So it gave you really at least a 24-hour lead. So it was extremely helpful at the time.

- With regard to commercial real estate, has the AI tool told you anything about that. Because that's been seen as the next shoe to drop.

JENS NORDVIG: So we can use the tool for all sectors. This week, we've had some news in consumer durables, where we can scan the whole sector. So it changes every week how we use the tool and which sector we're very focused on.

- All right. We're going to put a pin in this because we're going to continue this discussion in just a sec. Jens Nordvig, Exante Data founder and CEO and MarketReader co-founder and CEO.