Goldman Sachs The Markets
What’s the next tech trade?
Nov 22, 2024
Explore how mega cap tech stocks have driven market growth in 2024 and the potential for new investment opportunities beyond the 'Magnificent 7'. Delve into the evolving landscape of AI investments and the importance of long-term strategies over quick returns. Discover how the software sector remains resilient amid economic challenges, with a focus on consumer earnings and inflation impacts. The conversation even takes a lighthearted turn with a fun prediction about a local basketball team's future success.
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Quick takeaways
- The AI sector has seen an 80% increase in capital expenditure, outpacing non-AI technology's mere 2% growth over three years.
- With improving economic conditions and stabilizing interest rates, software companies are poised for significant recovery and growth opportunities.
Deep dives
The Impact of AI on the Economy
The economy is currently divided between the AI sector and non-AI sectors, with the former exhibiting significant growth. Over the past three years, capital expenditure (CapEx) in the AI sector has surged by around 80%, while investment in non-AI technology has lagged behind, growing at only 2% annually due to higher interest rates and other macroeconomic pressures. However, the trend is beginning to shift as economic conditions improve, leading to a reversal of headwinds faced by the non-AI technology market. As interest rates stabilize and AI applications start to gain traction across industries, many believe that this segment will experience a resurgence and accelerated growth.
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