The fast reception of generative man-made reasoning has supported markets this year, yet after the underlying elation, financial backers are awakening to the potential dangers, including the should be exceptionally particular in stock-picking.
Portfolio managers are currently examining the potential for AI disruption in a variety of industries, including IT services and consulting, media, information, and education.
The overall effect is viewed as extremely beneficial for the profitability of the company. However, analysts warn that there may also be losers in Europe and the United States, in addition to Nvidia (NVDA.O) and other obvious winners in the chip industry.
According to McKinsey, between 2030 and 2060, half of the current work activities could be automated, and generative AI has the potential to add $7.3 trillion annually to the value of the global economy.
However, if businesses want to fully utilize AI’s potential, they must also face significant obstacles like redundancies and rethinking their business models.
Even if it’s not a given, AI won’t always be advantageous. “There could be a deflationary effect,” stated Gilles Guibout, head of European equities at AXA Investment Managers in Paris, who helps manage over 900.44 billion euros.
He stated that clients could negotiate price reductions in some instances, and staff-light newcomers could reduce the market share of established players by redesigning their procedures.
That could slow sales growth and cause share prices to underperform, particularly for businesses whose growth is dependent on headcount or that are up against tough competition.
“Take services in IT: Customers will demand lower prices “if one hundred people are no longer required for coding, but only half or a third of that is,” Guibout stated.
According to the most recent survey conducted by Bank of America in June, 29% of global investors do not anticipate AI to increase profits or employment. That contrasts with 40% who do anticipate an increase.
All markets have already shown signs of concern regarding AI.
This year, shares of companies that manage call centers and other services that are thought to be vulnerable to being replaced by bots, such as French outsourcing firm Teleperformance (TEPRF.PA) and US-based Taskus (TASK.O), have both lost approximately 30%.
In education, UK-based Pearson (PSON.L) lost 15% one day in May when U.S. rival Chegg (CHGG.N), which was down 62% this year, said that customer growth was being hampered by significant student interest in the Microsoft-backed (MSFT.O) ChatGPT bot.
A few days later, Pearson held a conference call to discuss its AI strategy, indicating that investors are increasingly interested in learning more about how businesses handle the transition.
The AI investor day for Teleperformance, which has 410,000 employees in 170 countries, took place on Wednesday.
Some experts claim that price reductions have occasionally been extreme, exacerbating worries about earnings growth.
There has been much debate about the potential risks that generative AI may present. This has at last turned into a piece exaggerated,” Thomas McGarrity, head of values at RBC Abundance The executives.
He seemed sure that some professional data and information providers, who own proprietary data, would be able to incorporate generative AI into their products.
Others, on the other hand, continue to be cautious, claiming that the rapid adoption of less expensive AI-powered offerings could stifle growth once order backlogs for more conventional services are fulfilled.
Lemanik portfolio manager Andrea Scauri stated that despite the attractive valuations, he has avoided investing in some IT services stocks.
On the other hand, Scauri asserted that he thinks bigger businesses like Accenture are better equipped to manage the change and put the required capital expenditures into place.
Three months after announcing 19,000 layoffs, or approximately 2.5% of its workforce, Accenture unveiled a $3 billion investment plan to support its AI efforts.
This year, its shares have risen 19%, while those of its French rival Capgemini (CAPP.PA) have risen 13%. It is also thought that companies that handle regulated information, like Relx (REL.L), are less susceptible to AI headwinds.
Amundi’s small and midcap portfolio manager Cristina Matti stated that investors seeking AI exposure should avoid indiscriminate investing.
Don’t spend money only to promote yourself. She stated, “Doing your homework is very important.”
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