Search icon
Download the all-new Republic app:
NIFTY 50 23,540.75 Down stock -167.15 (-0.71%)
NIFTY 100 24,277.70 Down stock -200.40 (-0.82%)
NIFTY 500 22,107.40 Down stock -234.25 (-1.05%)
NIFTY MIDCAP 50 15,566.50 Down stock -301.55 (-1.90%)
INDIA VIX 14.68 up stock 0.02 (0.15%)
NIFTY MIDCAP 150 20,718.80 Down stock -342.00 (-1.62%)
NIFTY SMALLCAP 50 8,675.45 Down stock -163.40 (-1.85%)
NIFTY BANK 49,564.60 Down stock -637.55 (-1.27%)
NIFTY AUTO 23,368.40 Down stock -113.70 (-0.48%)
NIFTY FMCG 56,273.85 Down stock -445.70 (-0.79%)
NIFTY IT 42,951.00 Down stock -424.85 (-0.98%)
NIFTY MEDIA 1,820.10 Down stock -15.95 (-0.87%)
NIFTY METAL 8,469.60 Down stock -90.95 (-1.06%)
NIFTY PHARMA 23,051.95 Down stock -176.60 (-0.76%)
NIFTY PRIVATE BANK 24,349.15 Down stock -232.80 (-0.95%)
NIFTY REALTY 1,002.15 Down stock -17.95 (-1.76%)
NIFTY OIL & GAS 11,010.75 up stock 107.95 (0.99%)
NIFTY COMMODITIES 8,077.20 Down stock -35.55 (-0.44%)
NIFTY ENERGY 34,971.60 Down stock -193.15 (-0.55%)
LEADMINI 188 up stock 0.20 (0.11%)
ZINCMINI 261.25 up stock 0.25 (0.1%)
SILVERMIC 89730 up stock 72.00 (0.08%)
GOLDGUINEA 59188 up stock 50.00 (0.08%)
GOLDM 72900 up stock 28.00 (0.04%)
COTTONCNDY 56540 up stock 20.00 (0.04%)
SILVER 89675 up stock 29.00 (0.03%)
CRUDEOIL 6609 Down stock -237.00 (-3.46%)
NATURALGAS 177.5 Down stock -0.30 (-0.17%)
NATGASMINI 177.5 Down stock -0.30 (-0.17%)
MENTHAOIL 942.2 Down stock -1.20 (-0.13%)
ZINC 260.7 Down stock -0.25 (-0.1%)
ALUMINIUM 220.5 Down stock -0.20 (-0.09%)
LEAD 187 Down stock -0.10 (-0.05%)
NIFTY 50 23,540.75 Down stock -167.15 (-0.71%)
NIFTY 100 24,277.70 Down stock -200.40 (-0.82%)
NIFTY 500 22,107.40 Down stock -234.25 (-1.05%)
NIFTY MIDCAP 50 15,566.50 Down stock -301.55 (-1.90%)
INDIA VIX 14.68 up stock 0.02 (0.15%)
NIFTY MIDCAP 150 20,718.80 Down stock -342.00 (-1.62%)
NIFTY SMALLCAP 50 8,675.45 Down stock -163.40 (-1.85%)
NIFTY BANK 49,564.60 Down stock -637.55 (-1.27%)
NIFTY AUTO 23,368.40 Down stock -113.70 (-0.48%)
NIFTY FMCG 56,273.85 Down stock -445.70 (-0.79%)
NIFTY IT 42,951.00 Down stock -424.85 (-0.98%)
NIFTY MEDIA 1,820.10 Down stock -15.95 (-0.87%)
NIFTY METAL 8,469.60 Down stock -90.95 (-1.06%)
NIFTY PHARMA 23,051.95 Down stock -176.60 (-0.76%)
NIFTY PRIVATE BANK 24,349.15 Down stock -232.80 (-0.95%)
NIFTY REALTY 1,002.15 Down stock -17.95 (-1.76%)
NIFTY OIL & GAS 11,010.75 up stock 107.95 (0.99%)
NIFTY COMMODITIES 8,077.20 Down stock -35.55 (-0.44%)
NIFTY ENERGY 34,971.60 Down stock -193.15 (-0.55%)
LEADMINI 188 up stock 0.20 (0.11%)
ZINCMINI 261.25 up stock 0.25 (0.1%)
SILVERMIC 89730 up stock 72.00 (0.08%)
GOLDGUINEA 59188 up stock 50.00 (0.08%)
GOLDM 72900 up stock 28.00 (0.04%)
COTTONCNDY 56540 up stock 20.00 (0.04%)
SILVER 89675 up stock 29.00 (0.03%)
CRUDEOIL 6609 Down stock -237.00 (-3.46%)
NATURALGAS 177.5 Down stock -0.30 (-0.17%)
NATGASMINI 177.5 Down stock -0.30 (-0.17%)
MENTHAOIL 942.2 Down stock -1.20 (-0.13%)
ZINC 260.7 Down stock -0.25 (-0.1%)
ALUMINIUM 220.5 Down stock -0.20 (-0.09%)
LEAD 187 Down stock -0.10 (-0.05%)
OPINION

Published 13:54 IST, August 8th 2024

Tech stocks await AI’s real reckoning

A selloff in technology stocks wiped around $3 trillion of paper wealth from the industry in under a month.

Reuters Breakingviews
John Foley
Image for representational purposes only. | Image: Shutterstock

Once more with feeling. The artificial intelligence boom was big on the way up, and it has already been big on the way down. A selloff in technology stocks wiped around $3 trillion of paper wealth from the industry in under a month. The rout looks more driven by feelings and flows than facts. If that changes, a harder reset is possible.

Tech firms added $5 trillion of market value in the first six months of 2024, based on the 30% rise in the 416 stocks comprising the FR US Technology Index. Those handy gains made tech an easy place to sell if nerves got tested. And they roundly did, due to political shocks, a Japanese interest-rate shift, and rising U.S. unemployment. Between July 10 and Aug. 5, the CBOE Market Volatility Index tripled.

What hasn’t deteriorated is the market’s view of companies’ performance. Nvidia, maker of the chips powering AI giants’ efforts, lost one-fifth of its market value since July 10, even as estimates of next year’s earnings rose. That’s the case elsewhere, too: analysts expected S&P 500 tech firms’ earnings to increase 21% in 2025, as of Aug. 6 – more than the 19% predicted in April. Instead, it’s the multiple on which investors value those earnings that has come down. Citigroup strategists estimated in June that only one-third of AI-related stocks’ gains in the year to date came from rising profit estimates. Air is now being let out of overinflated tires.

Still, expectations change. AI is dominated by companies making huge investments for uncertain payoff. While Meta Platforms' 22% increase in ad sales last quarter suggests the recipe is working, that’s a tiny sliver of the eventual promised bounty. Getting the rest of the way requires a lot of cash: A Morgan Stanley analysis shows that 8 of the top companies investing in AI will plow $380 billion into capital expenditures in the next two years – 50% more than in the previous three. For Nvidia and its kin providing them the tools, that’s great: Meta’s Llama 4 AI model may use 10 times the computing power of its predecessor, says CEO Mark Zuckerberg.

The size of the prize itself is also up for grabs. AI could add nearly $18 trillion to the global economy, Accenture reckons. McKinsey has identified $4.4 trillion of productivity gains. But these are just assumptions; facts are yet to come in. Executives at Meta and Alphabet have conceded that it’s better to spend too much too soon than too little too late. That leaves room for volatility - and further upsets.

 

Updated 13:54 IST, August 8th 2024

LIVE TV

Republic TV is India's no.1 English news channel since its launch.

Search icon
Home
Live TV
Markets
News
Companies
Economy
Auto
Money
Technology
Top Voice
Deep Scroll
Videos
Interview
Life
Web Stories
Opinion
Industry
Union Budget 2024-25
Download the all-new Republic app: