<\/p>\n
\u201cAn investment in knowledge pays the best interest,” said Benjamin Franklin. But he didn\u2019t have to contend with artificial intelligence.<\/p>\n<\/p><\/div>\n
There are many aspects of the recent selloff that are concerning, with anything tangentially threatened by AI getting hit hard. Perhaps the most worrisome, however, is the fact that virtually no knowledge-based company appears to be safe. Software stocks are just the tip of the iceberg, with panic spreading to everything from legal providers to business information, real estate investment trusts, and logistics companies.<\/p>\n
\u201cThis matters since the main comparative advantage of the U.S. economy and U.S. equity markets has been as a genuine leader in the \u2018knowledge revolution,\u2019” writes Gavekal Research Founding Partner and Chief Executive Officer Louis Gave. \u201cSo, if the market is suddenly no longer rewarding the large number of knowledge companies in the same way it used to, this is really bad news for the U.S. equity market, whose valuation is rather stretched by any (non-knowledge-adjusted) measures.”<\/p>\n
Part of the American exceptionalism bull thesis that has prevailed in recent years rests on the idea that while other countries may be able to replicate breakthroughs in AI more cheaply, the U.S. remains at the forefront of the knowledge economy, making it unmatched in the intellectual arms race. If knowledge suddenly isn\u2019t worth paying for, then it\u2019s hard to justify paying a premium for U.S. stocks. Even after the recent selloff, the S&P 500 is trading at more than 21 times forward earnings\u2014certainly high by historical standards.<\/p>\n
As Gave notes, \u201cso much of the valuation of the U.S. equity market is based on intangibles and the belief that \u2018knowledge\u2019 is the most important of assets.” For most of human history, that\u2019s been true; the difference now is that \u201cthanks to AI, knowledge is suddenly ubiquitous and \u2018free.\u2019” Hence the rapid shift toward makers of physical goods and tangible assets. The U.S. can still claim some of those companies, but by and large that kind of market trend would be much more beneficial to the rest of the world. In other words, it\u2019s another leg of the Sell America trade.<\/p>\n
\u201cRather than solidifying US dominance over global financial markets\u2014the consensus opinion until five minutes ago\u2014it increasingly looks as if the spread of AI is instead destroying US outperformance,” Gave concludes. \u201cOr to put it in other words, AI seems to be yet another example of a revolution that ends up eating its own children.”<\/p>\n
ChatGPT can\u2019t compete with Alanis Morissette, but if nothing else, it won\u2019t struggle to come up with examples of irony.<\/p>\n
Write to Teresa Rivas at teresa.rivas@barrons.com<\/i><\/p>\n
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\u201cAn investment in knowledge pays the best interest,” said Benjamin Franklin. But he didn\u2019t have to contend with artificial intelligence. There are many aspects of the recent selloff that are concerning, with anything tangentially threatened by AI getting hit hard. Perhaps the most worrisome, however, is the fact that virtually no knowledge-based company appears to […]<\/p>\n","protected":false},"author":2,"featured_media":419686,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[9218,284,263,262,260,259,258,45594,265,202,261,45595,42075,264],"class_list":["post-419685","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-metaverse","tag-ai-revolution","tag-artificial-intelligence","tag-axie-infinity","tag-axs","tag-decentraland","tag-facebook","tag-game","tag-knowledge-economy","tag-mark-zuckerberg","tag-nft","tag-sandbox","tag-software-stocks","tag-u-s-equity-market","tag-vr"],"_links":{"self":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/419685","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/comments?post=419685"}],"version-history":[{"count":1,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/419685\/revisions"}],"predecessor-version":[{"id":419687,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/posts\/419685\/revisions\/419687"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media\/419686"}],"wp:attachment":[{"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/media?parent=419685"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/categories?post=419685"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dripp.zone\/news\/wp-json\/wp\/v2\/tags?post=419685"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}