As someone who has been in the market for many years, I believe I have the experience to know that one of the most expensive pronouncements is truly different this time. However, I believe no one has concrete knowledge about how technological advancements should be priced. The most recent example is the dot.com craze at the beginning of the millennium.
Back then, the widespread use of the internet and its use in commercial activities revolutionized marketing and logistics. This is one of the biggest challenges for markets, and fund managers in general: the necessity of making investment decisions in a very short timeframe on a subject they know little about.
Of course, to avoid digressing too much, let's say this chain of obligations continues not only in technological breakthroughs but also in a wide range of areas, such as judiciary and international relations. When you make a decision on a subject you don't know about, reason often leads you to extremes. Optimism and pessimism are similarly overbought or oversold. Therefore, the initial reaction of the markets is a result of this surprise and the assumptions they make. The balance created by the initial reactions may not last long, and undoubtedly, the slower-moving capital, often referred to as real money, which better assesses the impact of the current situation, will ultimately bring the matter to a close.
We see that all companies even slightly involved in the field of artificial intelligence have increased their market value, while those outside of this field have stagnated. To give a simple example, while the Nasdaq index, which includes technology companies and primarily companies categorized as the Magnificent Seven, is topping out almost daily, we see no similar performance in the Russell Index, which includes small and medium-sized companies. In short, artificial intelligence will likely revolutionize our lives, just as it did during the widespread adoption of the internet. Companies that adapt will see increased productivity, but we will likely see a normalization of the market impact in the near future.
