Artificial intelligence (AI) transforms various aspects of workers’ lives and drives up tech companies’ stock prices. However, some investors are skeptical about the sustainability and impact of this trend. Here are some of the key points to consider.
Some of the biggest beneficiaries of the AI boom are the chipmakers, such as Nvidia, AMD, and Taiwan Semiconductor Manufacturing Co. Their stocks have soared by more than 100% over the past year as they provide the hardware that powers AI applications. The so-called Magnificent Seven tech stocks — Apple, Microsoft, Nvidia, Amazon, Google, Meta, and Tesla — that dominate the S&P 500 have also gained significantly from the AI buzz. They are together up roughly 55% in the last year.
On the other hand, some large companies are investing heavily in AI technology and laying off employees in anticipation of higher productivity and lower costs. JPMorgan Chase CEO Jamie Dimon said that AI is not hype but real and that his company has about 200 people dedicated to researching generative AI. He said AI will handle a tremendous amount of stuff in the future.
The Risks and Challenges of the AI Hype
However, not everyone is convinced that AI is the real deal and will deliver the expected benefits. Some analysts warn that the top 10 companies in the S&P 500 are more overvalued today than during the tech bubble in the mid-1990s, based on their price-to-earnings ratios. They argue that the market is too focused on the AI narrative and ignores potential drawbacks, such as higher inflation, delayed interest rate cuts, and regulatory hurdles.
Some shareholders are also concerned about the ethical and social implications of AI. They are demanding more transparency and accountability from the tech giants, especially Apple, reportedly spending $1 billion annually on generative AI. A shareholder proposal, backed by two large Apple investors and introduced by the union federation AFL-CIO, asks the company to disclose any ethical guidelines it has adopted regarding AI technology. Apple tried to skip the vote, but the SEC rejected its request.
Fidelity reports 41% more 401(k) “millionaires” last year
Last year, more than 400,000 401(k) savers reached the coveted millionaire status, thanks to a strong stock and bond market, according to Fidelity Investments. But the number of 401(k) millionaires is still a small fraction of the 23 million participants in Fidelity’s workplace retirement plans.
Fidelity’s latest data, released on Tuesday, shows that the average 401(k) balance increased by 14% in 2023, reaching $118,600 by the end of the fourth quarter. Those saving consistently for at least 15 years saw their balances grow even more, topping $500,000 on average. This group includes many Gen Xers who are approaching retirement age.
But reaching the millionaire milestone is not just about market performance. It also requires disciplined saving habits and taking advantage of employer matches. Fidelity said that 27% of plan participants increased their contribution rate last year, and 78% of savers contributed enough to get the full employer match.
The average combined savings rate, including employee and employer contributions, was 13.9% last year, slightly higher than 13.7% in 2022.
Beyond Meat shares soar as company plans to slash costs and focus on growth
Beyond Meat, the maker of plant-based meat alternatives saw its shares surge in after-hours trading on Tuesday after announcing a plan to cut costs and streamline its operations in 2024. The company has partnerships with fast-food giants like McDonald’s and KFC and has been struggling with declining demand and rising expenses recently.
But on Tuesday, the company reported better-than-expected results for the fourth quarter of 2023 and unveiled a turnaround strategy. Beyond Meat CEO Ethan Brown stated, “Our 2024 strategy involves implementing steps to reduce operating expenses and cash use drastically.”.
The company said it would reduce its operating budget by at least $70 million in 2024 and focus on its core products and markets.As part of the plan, the company will discontinue its Beyond Meat jerky line, which it said had low growth potential.
Brown said the move would allow the company to allocate resources to other products “which we believe have higher profitable growth potential.”The company did not tell if it would lay off workers as part of the cost-cutting measures.
The news boosted Beyond Meat’s stock, which jumped more than 70% in after-hours trading on Tuesday after losing more than 60% of its value in the past year.
