Weekly Buzz: The long-short of earnings season

19 May 2023

🤖 Without The AI Hype, It’d Be A Very Different Year For Stocks

Ever since OpenAI’s ChatGPT took the world by storm late last year, investors have been tripping over themselves to try to capitalise on the explosive trend. Corporate leaders, meanwhile, have been scrambling to prove to investors that they’re cleverly harnessing the technology to drive revenue growth, improve operational efficiency, and more. In companies’ first-quarter earnings calls, they mentioned AI and related terms more than twice as often as they did a year ago. 

And it’s no wonder: AI fervour this year has been responsible for all of the S&P 500’s gains, according to a new analysis by Societe Generale. The investment bank's research shows that without the gains of “AI boom stocks,” the S&P 500 would actually be down 2% this year, rather than be up by 8%.

That’s not entirely surprising when you consider that stocks of companies perceived as AI winners – think: Nvidia, Microsoft, Alphabet, and so on – have been on an absolute tear. Nvidia's stock price has almost doubled so far this year, while shares in Microsoft – which invested $10 billion in OpenAI back in January – have surged by almost 30%, leaving them not far from their all-time high. Google parent Alphabet, meanwhile, saw its shares spike by more than 10% last week alone after it announced plans to integrate AI into its search engine and a whole host of other products.

What does this mean for investors? 

There are two ways to maintain exposure to this trend keeping in mind your risk profile:

  1. Our General Investing portfolios are well diversified to cover this trend. 
  2. Or consider our Thematic Portfolio's Technology Enablers, which provides exposure to "invisible" technologies like AI, Blockchain, and Semiconductors that are reshaping the world as we know it.

This section was written in collaboration with Finimize.

📊China’s recovery stumbles 

After a strong start to the year in China, the latest batch of economic data suggest the economy’s recovery might be losing steam. Industrial output grew 5.6% year-on-year while retail sales rose 18.4% – both coming in below expectations.

While those look like big gains, remember that China’s growth slumped this time last year as its zero-Covid policy led to lockdowns in major cities. Indeed, a look at the month-on-month readings shows a far less rosy picture, with the recovery’s momentum clearly slowing. And this slowing momentum suggests more economic stimulus may be on the way to support growth – something the People’s Bank of China (the country’s central bank) hinted at on Monday.

🎓Jargon buster: Economic stimulus 

Economic stimulus is like a shot of espresso for the economy – it gives us a quick jolt of energy and gets us moving again. It's a fancy term for the government's attempts to jumpstart our wallets and inspire us to spend and invest. Think tax breaks, infrastructure projects, and low-interest rates – all designed to boost economic growth.

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