Finding Opportunity Amid This Crazy Market

The S&P 500 is at an all-time high, up about 15% so far this year.

Most of this runup is happening because of the Magnificent 7 tech stocks and their quest to capitalize on artificial intelligence (AI). Thanks to fever-pitched investing, forecasters expect capital expenditures on AI could hit between $5.2 trillion to $7 trillion invested by 2030. That roughly amounts to one-sixth to one-fourth of 2024 U.S. GDP, according to a recent study by McKinsey & Company.

It’s simply astonishing.

Some of America’s most successful companies have linked their futures to the AI boom, including most of the Mag 7: Nvidia, META (Facebook), Oracle, Alphabet (Google), Apple, and Amazon. With ever-more-powerful computer chips and massive data centers coming online, AI is increasingly available to consumers worldwide. It is being integrated into nearly everything: medicine, science research, robotics, driverless cars, weather forecasting, air traffic control and business logistics, to name a few.

And that’s where opportunities lie for investors.

Chasing the Mag 7 stocks is working now, but over the long run, the greatest potential for the U.S. economy and investors might just rest with companies that use the power of AI to become more productive. The key is to find early adopters of AI who use the technology to produce more at less cost, resulting in more revenue growth and bigger profits.

AMG believes the “next big things” will likely come from the ranks of America’s small- and mid-size companies, firms with visionary leadership, strong balance sheets and a stated commitment to AI. Businesses that successfully embrace and harness AI early will have a competitive advantage that could power earnings growth for decades. It makes sense that the earning potential for these companies is immense when you consider that the current earnings P/E for the S&P 400 mid-cap index is around 19 compared to the S&P 500 at 28.

AMG is committed to finding those opportunistic companies and helping investors capitalize on them.