The US economy seems to be doing gangbusters lately, largely thanks to incredible booms in the tech sector. (View Highlight)
The stock market is booming — the S&P 500 hit 15 record closing highs so far this year, while the Nasdaq Composite boasts 17. The country’s GDP is growing better than expected. Microsoft just became the second $4 trillion company in history, just weeks after Nvidia became the first. (View Highlight)
But those headline numbers don’t seem to be trickling down to normal, working people. In fact, something interesting happens if you take AI away from the economy: you find a country that has been in the throes of stagnation, teetering on the brink of something even worse. By stripping away the effects of gluttonous AI hype, we see that the record-breaking numbers mask a dark storm swirling just below the surface. (View Highlight)
For one thing, though Wall Street appears to be doing great on paper, there are really just a tiny handful of tech giants running the show. A recent analysis by the Financial Times noted that, though stocks in most sectors did very well, actual profits are falling — a glaring red flag that the magnificent seven, the tech stocks representing Nvidia, Amazon, Google, Tesla, Microsoft, Apple and Meta, are dragging the rest of the S&P around by the collar. (View Highlight)
Take these AI giants away, and the actual performance of non-tech companies has been pretty foul. A CNBC analysis argued that 26 percent of the S&P 500’s explosive growth over the last three months came from lavish spending on the magnificent seven. (View Highlight)
Elsewhere, the numbers aren’t so hot. The FT highlights that profits in sectors like energy, consumer goods, financial markets, and raw materials are way down, for example — yet their stocks continue to climb. Without tech’s outrageous money moves, the stock market would be essentially stagnant. As TradeSmith editor Michael Salvadore writes, AI has essentially “bailed out the stock market… its investors… and the [Federal Reserve].” (View Highlight)
