Big Tech under recent scrutiny. As Big Tech and Artificial Intelligence (AI) become increasingly established in the current investing zeitgeist, the associated shine and hype has been called into question. The past two earnings seasons have seen a palpable change in investor sentiment, from exuberance and optimism to that of increasing scrutiny and skepticism; will lofty investments in AI technology translate to earnings growth? This change in sentiment triggered a sharp tech-led market sell-down in July. While markets have since recovered, it is undeniable that the lens through which investors view this sector has become increasingly critical.
Look past market noise; AI is a multi-decade megatrend. Considering how AI is still in its nascent stages, it is not surprising that healthy skepticism comes on the back of AI’s initial hype. Nonetheless, it is important to keep sight of the long-term trajectory and runway for AI. Here at the DBS CIO office, we remain structurally and long-term bullish on the technology space as well as its adjacent expressions on the basis of AI’s deeply transformative nature. We believe that the commercialisation of AI will present numerous monetisation opportunities, and drive earnings growth and shareholder return across various sectors and verticals. Performance wise, Big Tech (as represented by the NYFANG Index) and the wider US technology sector remain up 35% and 32% on a YTD basis, suggesting that investors still possess a healthy dose of optimism when it comes to the technology sector and its AI-related prospects.
Energy and healthcare are non-tech sectors that will benefit from AI. Previously, in part two of this series (published 31 July 2024), we detailed how the financial services and cybersecurity industries were set to be key beneficiaries of the second leg of the AI-led Tech boom.
In the third and final part of this AI-focused series, we examine how non-tech sectors - specifically energy and healthcare - will also benefit from AI’s commercialisation.
Figure 1: Despite the recent sell-off, Big Tech is up 35% YTD
Source: Bloomberg, DBS
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