When you live through a technological innovation boom it’s impossible to avoid trying to predict how it will turn out.
Will anyone be right about what the future of AI looks like?
Probably not.
Here are some of my current AI predictions about the world at large:
- I think we’re going to see an explosion in new business formation.
- I think some industries/roles will be materially impacted but most of us will simply do more work because of AI. We’re a busy culture.
- I think many awkward relationships will develop between humans and machines.
- I think AI will make some people smarter but most people dumber as skill atrophy.
- I think wealth inequality will get worse.
- I think AI is going to flatten the world in terms of economic opportunities.
That last one is already showing up in some ways when you look at stock markets around the globe.
This is not just a story about the Mag 7 or Nasdaq 100 anymore. The AI trade has gone global.
JP Morgan’s Michael Cembalest compared a basket of Chinese AI stocks to a basket of AI stocks in the S&P 500:
Since the start of 2024, emerging markets have been neck-and-neck with the Nasdaq 100:
It helps when you have two countries — South Korea and Taiwan1 — that now make up half of the index with returns like this:
In the past 12 months, South Korea is up almost 180%. Taiwan is up more than 100%. In that same time the S&P 500 and Nasdaq 100 are up 25% and 34%, respectively.
These markets are heavily concentrated in stocks that are part of the AI buildout — SK Hynix, Samsung and Taiwan Semiconductor all make up more than 20% in these country stock markets. The U.S. stock market might seem concentrated but stock markets in other countries are far more top heavy.
China is also up almost 60% over the past year. Japan is up 28%. Thailand is up 41%.
I don’t know if this will last. Friday some a big reversal in many of the hottest markets.
But the U.S. stock market was the only game in town for 10+ years. That’s not the case anymore.
Maybe America will continue to dominate the financial markets from here but it’s worth considering the possibility that AI is going to level the playing field.
The hope is this will also induce households abroad to invest more money in the stock market. Paul Kedrosky has a chart that shows the percentage of households that own stocks:
Hopefully AI will bring more people into the stock market.
Michael and I talked about the global AI trade and a lot more on this week’s Animal Spirits video:
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Further Reading:
The Winners Write the History Books
Now here’s what I’ve been reading lately:
Books:
Podcast book tour:
1These numbers were even better before South Korea fell 14% and Taiwan dropped 7% on Friday.
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