The Bull Market Revolution: How AI is Shaping the Future of Investing

As the United States slips into an economic contraction, and the Eurozone experiences a recession, the typical definition of a bull market is inconsistent with the current market condition. A bull market generally coincides with economic growth; whereas, these current conditions are due to rate hikes, inflation, surging mortgage costs, and reduced spending by consumers. Despite this, there has been a recent surge in market strength due to investments in artificial intelligence. The recent hype on AI investments is driving the tech industry. This industry has been experiencing a narrow market leadership where only a few specific companies are seeing success.

The Bull Market and AI

The bull market is not characterised by economic growth this time around due to the investment in artificial intelligence (AI). The technology industry is experiencing a push in AI investment. Many companies, such as Alphabet, Apple, Amazon, Meta, Nvidia, Tesla, and others, are placing their bets on becoming part of the AI boom. These companies are six of the seven highest-valued companies in the S&P 500, with Berkshire Hathaway being first, ahead of Meta. These companies represent 28% of the S&P’s total value. Even when developing AI incorporates things as small as auto-correct on the iPhone or the ads seen on an Amazon page, it is still significant enough to drive the market.

The situation today is a bit more convoluted than a straightforward bull market or bear market description. AI-supported tech companies are experiencing a moment of topical, but temporary, success while the impact on cyclical and smaller enterprises is bleak. The cyclical and smaller companies, like real estate, materials, and energy, are continuing to suffer. This circumstance shows that this is not a cyclical recovery.

The Bull Market’s Numbers

The S&P 500 is up only 12% this year, but the success beneath the surface indicates that we will not see similar gains over the next six months. The majority of the S&P 500 companies are not beating the index, with fewer than a quarter of companies doing so. When a percentage of the market experiences a “quality rally,” others within the market tend to experience a market correction of some kind leading up to the phenomenon.

Editorial and Advice

The recent bull market in tech investments is not reflective of economic growth in society in general. It is only making a few tech companies richer while many others struggle to stay afloat. This phenomenon is concerning, especially since investors are in an especially “greedy” mood, which could negatively impact the market in the future. Thus, it is advisable to carefully evaluate investments, not only based on the potential for substantial returns but also on ethical considerations. The developments in AI can be of significant benefit when developed with adequate capital and support. Still, it should not overshadow the ethical considerations that must be taken into account for all emerging technology. The stakeholders responsible for financing these technological advances should be cautious about the implications of their investments beyond pure profit.