US Economy Most Dynamic Ever as AI and Infrastructure Outpace Fed Rate Hikes, ‘Big Short’ Investor Steve Eisman Asserts
The U.S. economy has defied expectations by maintaining its robustness despite persistent rate hikes by the Federal Reserve.
This resilience has left many on Wall Street perplexed, with some anticipating a recession. However, Steve Eisman, a senior portfolio manager at Neuberger Berman and known for his prescient bet against toxic mortgages prior to the Great Financial Crisis, remains optimistic about financial markets.
Eisman attributes the economy’s strength to the rapid advancements in artificial intelligence (AI) and the surge in infrastructure projects.
In a recent interview with CNBC, Eisman expressed his bullish stance, stating, “We’re powering through, and I believe the only logical conclusion is that the U.S. economy is more dynamic than it has ever been in its history.”
He emphasized the significance of the tech sector’s next phase, which involves consumers purchasing new AI-enabled devices such as phones and laptops. This trend is expected to significantly impact Apple, which recently unveiled a range of new AI features. Apple’s customer base is anticipated to undergo a massive refresh cycle, with many upgrading their iPhones.
Eisman stressed the importance of maintaining an Apple stock position, saying, “Definitely hold on to your Apple position. It’s too pivotal to the entire narrative.” He also highlighted Microsoft and Alphabet, Google’s parent company, as ‘core holdings.’
However, Eisman raised an intriguing question regarding the potential impact of AI on software stocks. He pondered whether the cost of creating software could ‘implode’ if AI is as successful as anticipated, potentially eroding the competitive advantages some companies have gained.
The recent shift toward hardware stocks, exemplified by Nvidia’s meteoric rally, has been noteworthy.
Nvidia has seen its shares surge 166% year-to-date and more than 200% from the same time last year, making it a $3 trillion company that accounts for over a third of the S&P 500’s gains this year.
Apollo Chief Economist Torsten Sløk issued a cautionary note, emphasizing the risks associated with relying heavily on one stock. “Such a high concentration implies that if NVIDIA continues to rise, then things are fine. But if it starts to decline, then the S&P 500 will be hit hard,” he wrote in a recent note.
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