Odd Lots Michael Cembalest on Why AI Is the Stock Market Bet of the Century
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May 29, 2025 
Michael Cembalest, the Chairman of market and investment strategy at JP Morgan Asset Management, shares insights from nearly 40 years of investment analysis. He discusses why he believes AI is the stock market's 'bet of the century.' Michael delves into the significant dominance of U.S. tech giants, the competitive landscape posed by Chinese advancements in AI, and potential profitability challenges. He also addresses the energy sector's evolving dynamics and critiques small modular nuclear reactors, painting a vivid picture of today's market trends.
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AI's Market Valuation Impact
- AI's importance to stock market valuations can't be overstated, driving massive profit divergence.
- MAG7 companies' earnings growth vastly surpasses the rest with unprecedented capital and R&D spending levels.
Unusual Growth of Big Companies
- Biggest companies growing faster than smaller ones is historically rare in stock markets.
- MAG7 growth defies typical size bias often seen in equity and private equity markets.
US Tech Dominance Explained
- The US dominates large-cap tech due to deep digitization across industries.
- This tech weight explains why US stocks seem expensive compared to regions like Europe.