"AI Faith" May Help Drive Technology Stocks Higher, But the Road to "Profitability Test" is Long

According to the information obtained by Zhītōng Finance APP, investors on Wall Street and in other regions are betting that the technology stock frenzy in 2023 will continue to gain momentum. In the latest market survey, out of 514 respondents, 77% of them plan to increase their investment in or maintain their investment in technology stocks in the next six months. At the same time, less than 10% of people believe that the bubble in this industry will burst soon. This bullish sentiment has driven the Nasdaq 100 Index to achieve its best performance in the first half of the year in history, increased market valuations, and caught Wall Street professionals off guard.

However, despite the potential profits that survey participants may gain from the skyrocketing AI market, they have not fully immersed themselves in the technology field. 50% of the respondents are unwilling to spend money to purchase AI tools that can help individuals or businesses, and most companies also have no plans to use these tools in their transactions or investments.

All of this highlights the profitability challenges that companies face in the era of ChatGPT. Although companies are investing in AI technologies such as ChatGPT, it is not easy to make profits from these investments in the short term.

The analysis team at Robert W. Baird & Co stated, "Currently, short-term speculation has gone too far."

Led by companies such as Apple (AAPL.US) and Microsoft (MSFT.US), the Nasdaq 100 Index has soared more than 40% since the beginning of the year. The price-earnings ratio of this index is 25 times, higher than the average level of nearly 21 times in the past decade. Executives are talking more about artificial intelligence in this fiscal quarter rather than the upcoming recession.

Unlike the dot-com bubble in the 2000s, artificial intelligence is not entirely speculative, as there are already many practical applications in the works. Industry giants have launched new AI products, hoping to attract enterprise customers by providing productivity-enhancing tools. For example, Microsoft's Copilot service is integrated into its ubiquitous Microsoft 365 software suite, utilizing generative AI to write emails or perform digital calculations more efficiently.

Microsoft plans to charge $30 per month for the Copilot service. This service will face competition from Alphabet Inc. (GOOGL.US), which has integrated AI capabilities into its own Workspace applications such as Gmail and Google Docs. The company has also launched new products for advertisers and is testing a tool for news organizations that uses AI to write articles.

As a computer processor supplier for AI applications, NVIDIA (NVDA.US) has become the representative of this AI frenzy, with a rise of over 200% this year. It is the first chip manufacturer with a market value of $1 trillion, and 29% of MLIV Pulse respondents believe that NVIDIA will become the second to fourth largest company globally in the next two years. However, despite the gradual integration of artificial intelligence into the workplace, 64% of respondents do not believe that this new technology will play a significant role in the core aspects of their work in the next three years. Meanwhile, earlier this year, economists at Goldman Sachs estimated that 70% of American workers' jobs will be impacted by artificial intelligence, but only a small fraction of people will see their positions replaced by new technology. Goldman Sachs stated that the office and administrative support, as well as legal functions, are among the industries at the highest risk.

With the advancements in artificial intelligence, robotics, and quantum computing, the President of Yardeni Research suggests that the US economy has a "reasonable" opportunity to thrive due to improved productivity.