3 Min Read
Artificial intelligence (AI) is not a bubble but a transformative force akin to the Industrial Revolution, according to Ben Powell, Chief Middle East and Asia Pacific Investment Strategist at BlackRock Investment Institute.
Powell addressed growing concerns about AI-driven market enthusiasm, which the European Central Bank (ECB) recently cautioned could lead to a stock market bubble if investor expectations falter.
In its Financial Stability Review released on November 20, Reuters reported that the ECB highlighted the stock market’s increasing dependence on a few AI-focused firms, particularly in the United States. "This concentration among a few large firms raises concerns over the possibility of an AI-related asset price bubble," the ECB said, adding that disappointing earnings from these firms could trigger global spillovers due to deeply interconnected equity markets.
Countering such concerns, Powell maintained that the AI boom is supported by real revenue growth.
“No, I don’t think so. They're making real money. People sometimes ask me: is this the 1990s again? And the answer is clearly no. If you think about the late 1990s, there were certain companies, not only did they not make any earnings, they didn't even make any revenue, and they were valued at billions of dollars. These companies are making huge quantities of money. They have extraordinary pricing power,” he said, dismissing comparisons to the dot-com bubble of the 1990s.
Powell emphasised that BlackRock views AI as a revolutionary technology and remains optimistic about its long-term prospects.
“Hundreds of billions of dollars of real money are flowing into building the energy architecture and data centres needed for AI,” he noted.
Powell described AI’s development as unfolding in phases, with the current focus on the build-out of infrastructure. BlackRock is targeting investments in companies benefiting from this capital expenditure.
Meanwhile, Nvidia Corp., the world's most valuable company, reported its third quarter results that beat analyst expectations. However, the company's guidance, though higher than the average analyst expectation, was below the highest estimate.
Also Read: Nvidia nearly doubles revenue on AI demand
Powell's view on the Indian market
Powell suggests that Foreign Institutional Investor (FII) outflows from the country may stabilise as enthusiasm for China fades.
According to Powell, factors such as a stronger US dollar and optimism around China had contributed to recent outflows of nearly $14 billion over 45 days. However, with China's fiscal measures falling short of expectations, he believes the situation may soon reverse.
He sees infrastructure as a promising sector for investment in India, backed by strong balance sheets and substantial domestic demand.
Powell addressed growing concerns about AI-driven market enthusiasm, which the European Central Bank (ECB) recently cautioned could lead to a stock market bubble if investor expectations falter.
In its Financial Stability Review released on November 20, Reuters reported that the ECB highlighted the stock market’s increasing dependence on a few AI-focused firms, particularly in the United States. "This concentration among a few large firms raises concerns over the possibility of an AI-related asset price bubble," the ECB said, adding that disappointing earnings from these firms could trigger global spillovers due to deeply interconnected equity markets.
Countering such concerns, Powell maintained that the AI boom is supported by real revenue growth.
“No, I don’t think so. They're making real money. People sometimes ask me: is this the 1990s again? And the answer is clearly no. If you think about the late 1990s, there were certain companies, not only did they not make any earnings, they didn't even make any revenue, and they were valued at billions of dollars. These companies are making huge quantities of money. They have extraordinary pricing power,” he said, dismissing comparisons to the dot-com bubble of the 1990s.
Powell emphasised that BlackRock views AI as a revolutionary technology and remains optimistic about its long-term prospects.
“Hundreds of billions of dollars of real money are flowing into building the energy architecture and data centres needed for AI,” he noted.
Powell described AI’s development as unfolding in phases, with the current focus on the build-out of infrastructure. BlackRock is targeting investments in companies benefiting from this capital expenditure.
Meanwhile, Nvidia Corp., the world's most valuable company, reported its third quarter results that beat analyst expectations. However, the company's guidance, though higher than the average analyst expectation, was below the highest estimate.
Also Read: Nvidia nearly doubles revenue on AI demand
Powell's view on the Indian market
Powell suggests that Foreign Institutional Investor (FII) outflows from the country may stabilise as enthusiasm for China fades.
According to Powell, factors such as a stronger US dollar and optimism around China had contributed to recent outflows of nearly $14 billion over 45 days. However, with China's fiscal measures falling short of expectations, he believes the situation may soon reverse.
He sees infrastructure as a promising sector for investment in India, backed by strong balance sheets and substantial domestic demand.
First Published: Nov 21, 2024 12:52 PM IST
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