- According to Goldman Sachs, the artificial intelligence hype in the stock market is starting to cool down.
- The proportion of S&P 500 companies that mentioned “AI” during their quarterly earnings calls declined in the third quarter.
- “Similarly, Google search volume for AI grew rapidly in early 2023, but has plateaued in recent weeks,” Goldman Sachs said.
Our chart of the day is from Goldman Sachs, which shows that the hype around artificial intelligence in the stock market is starting to cool down.
The chart shows that the proportion of S&P 500 companies that mentioned “AI” during their quarterly earnings calls declined from a peak of 35% in the second quarter to 29% in the third quarter.
Mentions of “AI” grew to nearly 10% during quarterly earnings calls in late 2022, and were supercharged by the introduction of OpenAI’s ChatGPT in November 2022. But enthusiasm for the new technology appears to be waning, at least for now, according to Goldman Sachs.
“Similarly, Google search volume for AI grew rapidly in early 2023, but has plateaued in recent weeks,” Goldman Sachs said.
If AI excitement among companies and investors is indeed reaching a tipping point, it could be a risk for mega-cap tech stocks that have made a big pivot into the sector, like Microsoft and Alphabet.
Goldman Sachs said, “ChatGPT and the emergence of AI more broadly benefited the largest stocks that were directly or indirectly involved in the development of the technology.”
The publicity about the softness in AI comes as hedge funds have increased their investment in mega-cap tech stocks this year. That high ownership level represents another risk for these names, which have significantly outperformed the broader stock market this year, because it represents a large group of potential sellers who could profit if enthusiasm for AI wanes. Might want to book.
Goldman Sachs reported, “At the beginning of 2023, US single stock hedge funds’ net exposure to mega-cap tech stocks was only in the 12th percentile compared with history since 2016. Today, the situation is in the 99th percentile since 2016. “
Despite a slowdown in mentions of AI on quarterly earnings calls, Wedbush analyst Dan Ives sees great potential for the new technology to generate more business for tech companies like Microsoft.
“It became very clear to us that the monetization opportunities around deploying AI and ChatGPAT in the cloud are a transformative opportunity across the industry.” [Microsoft] In the driver’s seat,” Ives told clients in a recent note that AI developments could push shares of the tech giant to new highs next year.