The article discusses the uncertainties surrounding productivity gains from AI, particularly large language models (LLMs). It highlights that China's DeepSeek R1 model presents cost-effective training, potentially lowering overall AI deployment costs. This will likely encourage firms beyond the tech sector to adopt AI technologies, enhancing their operational efficiency. Key S&P 500 stocks like PLTR and AVGO are identified as winners in this evolving landscape. Overall, the article contemplates the S&P 500's valuation premium, suggesting that it could be justified by ongoing AI advancements and their expected contribution to sales and earnings growth.
The advent of China's DeepSeek R1 model, which costs significantly less to train, is likely to catalyze widespread AI adoption among various firms.
The S&P 500 may continue justifying its historic premium due to the rapid pace of AI innovation translating to real sales and earnings growth.
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