After the hustle and bustle, investors began to "pick" AI!

Image source: Generated by Unbounded AI

Since the beginning of this year, generative AI has set off a carnival in the global stock market, but after the enthusiasm faded, global investors began to gradually regain their rationality and become more cautious when choosing stocks. **

Industries ranging from IT services and consulting to media to information and education are now under the scrutiny of portfolio managers looking to predict which industries will take off with AI and which will not.

McKinsey previously estimated that generative AI could increase the value of the global economy by $7.3 trillion per year, and believed that half of current production activities could be automated between 2030 and 2060.

However, this also means that those companies that cannot keep up with the trend of AI will be ruthlessly eliminated. Companies will face enormous challenges, such as layoffs and business model transformations, if they are to realize the full potential of AI.

In this regard, Gilles Guibout, head of European equities at AXA Investment Managers, an asset management company in Paris, said: “AI may not only not have a positive impact, but may have a deflationary effect.” Guibout is responsible for managing more than 820 billion euros (about 9004.4 billions of dollars) in assets.

“Take IT services as an example: If a job that used to require 100 people to program now costs half or a third, customers will ask for a price reduction,” Guibout said.

**In the case of little change in sales volume, price cuts may lead to lower sales, further eroding company profitability, resulting in underperformance of stock prices, and the situation will be more severe for companies that face fierce competition or cannot quickly adapt to AI. bad. **

** According to the latest Bank of America survey in June, 29% of global investors do not expect AI to increase corporate profits or employment opportunities. However, there are more investors who remain optimistic, as high as 40%. **

AI risk concerns spread, outsourcing, education industry hit

Concerns about AI are already evident across industries.

French outsourcing company Teleperformance and U.S. digital outsourcer Taskus have both lost more than 30 percent this year.

Teleperformance has 410,000 employees in 170 countries and Taskus has nearly 50,000 employees. In the eyes of many people, businesses such as call centers of these companies are very easy to be replaced by robots.

In the field of education, Chegg in the United States has plummeted 65% this year, and Pearson Group in the United Kingdom has plummeted 15% in a single day in May. The latter believes that students' interest in ChatGPT has hit customer growth.

Even the chip sector, which exploded some time ago, has a strange atmosphere. The chip giant Intel has experienced the worst week in a year, and AMD and Broadcom have suffered six consecutive losses.

As mentioned in previous articles on Wall Street, the storm of shareholding reduction has swept through the Chinese and American stock markets recently. Nvidia has encountered directors and the old European financial family Rothschild family asset management institutions to reduce their holdings. Oracle has encountered a founder’s reduction of holdings. Wei encountered the founder's ex-wife and reduced her holdings by 2.2 billion.

Analysts are divided on AI risk

While investors and some analysts have sensed danger, others remain optimistic.

Thomas McGarrity, head of equities at RBC Wealth Management, said: “There is a lot of focus on the possible risks of generative AI. But it’s a bit over the top.”

He is confident in the ability of specialized information and data providers with independent data systems to integrate generative AI into their products.

Some analysts are more cautiously optimistic**, arguing that the rapid adoption of cheaper AI products could slow the company's growth once the backlog of more traditional services is filled. **

Andrea Scauri, portfolio manager at Lemanik, said uncertainty around AI has deterred him from investing in some IT services stocks, even though valuations look attractive.

Scauri, on the other hand, said he believes larger players like consulting giant Accenture are better equipped to navigate the transition and deploy the necessary capital expenditures.

Accenture this month unveiled a $3 billion investment plan to bolster its AI business, and its shares have risen 19% this year.

Separately, French consultancy Capgemini rose 13%.

Cristina Matti, Portfolio Manager of Small and Medium Caps at Agricole Bank, said that for investors seeking AI investment, they should choose carefully when investing.

** "Don't just buy for the sake of buying, it's important to do your homework," she said.