How the A.I. explosion could save the market and maybe the economy

Raw Text

Skip Navigation

watch live

Markets

Pre-Markets

U.S. Markets

Currencies

Cryptocurrency

Futures & Commodities

Bonds

Funds & ETFs

Business

Economy

Finance

Health & Science

Media

Real Estate

Energy

Climate

Transportation

Industrials

Retail

Wealth

Life

Small Business

Investing

Personal Finance

Fintech

Financial Advisors

Options Action

ETF Street

Buffett Archive

Earnings

Trader Talk

Tech

Cybersecurity

Enterprise

Internet

Media

Mobile

Social Media

CNBC Disruptor 50

Tech Guide

Politics

White House

Policy

Defense

Congress

Equity and Opportunity

CNBC TV

Live TV

Live Audio

Business Day Shows

Entertainment Shows

Full Episodes

Latest Video

Top Video

CEO Interviews

CNBC Documentaries

CNBC Podcasts

CNBC World

Digital Originals

Live TV Schedule

Watchlist

Investing Club

Trust Portfolio

Analysis

Trade Alerts

Meeting Videos

Homestretch

Jim's Columns

Education

PRO

Pro News

Pro Live

Market Forecast

Subscribe

Sign In

Menu

Make It

select ALL SELECT Credit Cards Loans Banking Mortgages Insurance Credit Monitoring Personal Finance Small Business Taxes Help for Low Credit Scores Investing SELECT All Credit Cards Find the Credit Card for You Best Credit Cards Best Rewards Credit Cards Best Travel Credit Cards Best 0% APR Credit Cards Best Balance Transfer Credit Cards Best Cash Back Credit Cards Best Credit Card Welcome Bonuses Best Credit Cards to Build Credit SELECT All Loans Find the Best Personal Loan for You Best Personal Loans Best Debt Consolidation Loans Best Loans to Refinance Credit Card Debt Best Loans with Fast Funding Best Small Personal Loans Best Large Personal Loans Best Personal Loans to Apply Online Best Student Loan Refinance SELECT All Banking Find the Savings Account for You Best High Yield Savings Accounts Best Big Bank Savings Accounts Best Big Bank Checking Accounts Best No Fee Checking Accounts No Overdraft Fee Checking Accounts Best Checking Account Bonuses Best Money Market Accounts Best CDs Best Credit Unions SELECT All Mortgages Best Mortgages Best Mortgages for Small Down Payment Best Mortgages for No Down Payment Best Mortgages with No Origination Fee Best Mortgages for Average Credit Score Adjustable Rate Mortgages Affording a Mortgage SELECT All Insurance Best Life Insurance Best Homeowners Insurance Best Renters Insurance Best Car Insurance Travel Insurance SELECT All Credit Monitoring Best Credit Monitoring Services Best Identity Theft Protection How to Boost Your Credit Score Credit Repair Services SELECT All Personal Finance Best Budgeting Apps Best Expense Tracker Apps Best Money Transfer Apps Best Resale Apps and Sites Buy Now Pay Later (BNPL) Apps Best Debt Relief SELECT All Small Business Best Small Business Savings Accounts Best Small Business Checking Accounts Best Credit Cards for Small Business Best Small Business Loans Best Tax Software for Small Business SELECT All Taxes Best Tax Software Best Tax Software for Small Businesses Tax Refunds SELECT All Help for Low Credit Scores Best Credit Cards for Bad Credit Best Personal Loans for Bad Credit Best Debt Consolidation Loans for Bad Credit Personal Loans if You Don't Have Credit Best Credit Cards for Building Credit Personal Loans for 580 Credit Score or Lower Personal Loans for 670 Credit Score or Lower Best Mortgages for Bad Credit Best Hardship Loans How to Boost Your Credit Score SELECT All Investing Best IRA Accounts Best Roth IRA Accounts Best Investing Apps Best Free Stock Trading Platforms Best Robo-Advisors Index Funds Mutual Funds ETFs Bonds

USA

INTL

watch live

Search quotes, news & videos

Watchlist

SIGN IN

Create free account

Markets

Business

Investing

Tech

Politics

CNBC TV

Watchlist

Investing Club

PRO

Menu

Economy

Jeff Cox

@jeff.cox.7528

@JeffCoxCNBCcom

WATCH LIVE

Nvidia earnings crystallized an important point for both markets and the economy: For better or worse, artificial intelligence is the future.

The company guided it was expecting $11 billion in sales for the current quarter, largely driven by its leadership position in the AI chip-supplying business.

A lopsided market reaction Thursday served as a reminder of a stratified economy in which technological benefits tend to spread slowly.

In this article

NVDA

.IXIC

.SPX

Follow your favorite stocks CREATE FREE ACCOUNT

A blockbuster profit report Wednesday from Nvidia crystallized an important point for both markets and the economy: For better or worse, artificial intelligence is the future.

Whether it's personalized shopping, self-driving cars or a broad array of robotics uses for health care, gaming and finance, AI will become a factor in virtually everyone's lives.

related investing news

These are the next stocks to get an A.I. boost like Nvidia, according to Wall Street

Samantha Subin

Analysts scramble to raise price targets on Nvidia after super earnings. JPMorgan goes to $500

Hakyung Kim

Nvidia's massive fiscal first-quarter earnings helped quantify the phenomenon as the firm nears an elite cast of tech leaders with $1 trillion market valuations and clear leadership status both on Wall Street and in Silicon Valley.

"AI is real, AI is not a fad and we're only in the early innings," said Steve Blitz, chief U.S. economist at TS Lombard. "Does it change the course of the economy over the next three to six months? Probably not. Does it change the economy over the course of the next three to six years? Absolutely, and in very interesting ways."

Some of the changes Blitz foresees are reduced demand for foreign labor, a "point of sale" effect where coding and creative writing can be done by machines instead of people and a host of other activities that go beyond what appears obvious now.

Development of products such as OpenAI's ChatGPT, a chatbot that converses with the user, has helped bring home the potential.

"It's hard for me to overstate the value or the impact of AI, and it is in keeping with my view that this coming decade is all about the broader application of technology beyond what we've seen to date, beyond computers and phones, and that application has tremendous upside," Blitz said.

Isolated effects so far

For Nvidia, the upside already has been apparent.

As if profit of $1.09 a share on revenue of $7.19 billion , both well above Wall Street estimates, wasn't enough, the company guided it was expecting $11 billion in sales for the current quarter, largely driven by its leadership position in the AI chip-supplying business.

Shares soared more than 26% higher around midday Thursday and the company's market value surpassed $950 billion.

Broader market reaction, however, was underwhelming.

While the S&P 500 semiconductor index jumped 11.4%, the broader Nasdaq Composite rose a more muted 1.7%. The S&P 500 was up about 0.9%, while the Dow Jones Industrial Average slipped more than 50 points as investors continued to fret over the debt ceiling negotiations in Washington.

watch now

VIDEO

4:05

04:05

Squawk on the Street

At the same time, worries of an economic slowdown persisted — despite his excitement over AI, Blitz still thinks the U.S. is headed for recession — and the lopsided market reaction served as a reminder of a stratified economy in which technological benefits tend to spread slowly.

"The spillover and the benefits that the rest of the economy will derive from AI is a multiyear, multidecade process," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "Is this an incremental piece to growth or is this now diverting spending from other things because every other part of the economy, outside of spending on travel, leisure and restaurants, doesn't seem to be going that well?"

Boockvar pointed out small-cap stocks, for instance, were losing big Thursday, with the Russell 2000 off about 0.8% in early afternoon trading.

'Serious holes in the economy'

That happened even though it seems those companies would benefit from the cost-saving aspects of AI such as the ability to reduce staffing expenses. Nvidia's chief competitor in the chip space, Intel , also was getting slammed, down 6.2% on the session. Quarterly tech earnings overall declined 10.4% heading into this week, according to FactSet, though some of the biggest firms did beat Wall Street's lowered expectations.

"There are some serious holes in the economy that we can't ignore here," Boockvar said. "If the AI craze cools, people will see that the underlying business trends of Microsoft, Google and Amazon are clearly slowing because we all breathe the same economic air."

AI hasn't been a winner for everyone, either.

DataTrek Research looked at nine big AI-related companies that came to market through initial public offerings over the past three years and found their collective valuation is down 74% from their debut levels.

The group includes UiPath , Pagaya Technologies and Exscientia . Their stocks have rallied in 2023, up an average 41%, but the seven-largest tech companies, a group that includes Nvidia, have surged an average 58%.

"So far, Big Tech has collectively benefited most from the buzz around gen AI. We think this trend will continue given their ability to leverage their global scale and large competitive moats when utilizing this disruptive technology," DataTrek co-founder Nicholas Colas wrote. "Gen AI may end up making US Big Tech even bigger and more systematically important, rather than allowing upstarts to play the classic role of disruptive innovators."

Indeed, market veteran Art Cashin noted without the big seven stocks, the S&P 500 would surrender all of its 8% gain this year.

"You know, supposedly, the high tide lifts all boats," the director of floor operations for UBS said on CNBC's " Squawk on the Street ." "This is a very selective tide. And I'm not ready to throw out the confetti yet."

watch now

VIDEO

6:26

06:26

Squawk on the Street

Subscribe to CNBC PRO

Licensing & Reprints

CNBC Councils

Select Personal Finance

CNBC on Peacock

Join the CNBC Panel

Supply Chain Values

Select Shopping

Closed Captioning

Digital Products

News Releases

Internships

Corrections

About CNBC

Ad Choices

Site Map

Podcasts

Careers

Help

Contact

News Tips

Got a confidential news tip? We want to hear from you.

Get In Touch

Advertise With Us

Please Contact Us

CNBC Newsletters

Sign up for free newsletters and get more CNBC delivered to your inbox

Sign Up Now

Get this delivered to your inbox, and more info about our products and services.

Privacy Policy

|

Do Not Sell My Personal Information

|

CA Notice

|

Terms of Service

© 2023 CNBC LLC. All Rights Reserved. A Division of NBCUniversal

Data is a real-time snapshot *Data is delayed at least 15 minutes. Global Business and Financial News, Stock Quotes, and Market Data and Analysis.

Market Data Terms of Use and Disclaimers

Data also provided by

Single Line Text

Skip Navigation. watch live. Markets. Pre-Markets. U.S. Markets. Currencies. Cryptocurrency. Futures & Commodities. Bonds. Funds & ETFs. Business. Economy. Finance. Health & Science. Media. Real Estate. Energy. Climate. Transportation. Industrials. Retail. Wealth. Life. Small Business. Investing. Personal Finance. Fintech. Financial Advisors. Options Action. ETF Street. Buffett Archive. Earnings. Trader Talk. Tech. Cybersecurity. Enterprise. Internet. Media. Mobile. Social Media. CNBC Disruptor 50. Tech Guide. Politics. White House. Policy. Defense. Congress. Equity and Opportunity. CNBC TV. Live TV. Live Audio. Business Day Shows. Entertainment Shows. Full Episodes. Latest Video. Top Video. CEO Interviews. CNBC Documentaries. CNBC Podcasts. CNBC World. Digital Originals. Live TV Schedule. Watchlist. Investing Club. Trust Portfolio. Analysis. Trade Alerts. Meeting Videos. Homestretch. Jim's Columns. Education. PRO. Pro News. Pro Live. Market Forecast. Subscribe. Sign In. Menu. Make It. select ALL SELECT Credit Cards Loans Banking Mortgages Insurance Credit Monitoring Personal Finance Small Business Taxes Help for Low Credit Scores Investing SELECT All Credit Cards Find the Credit Card for You Best Credit Cards Best Rewards Credit Cards Best Travel Credit Cards Best 0% APR Credit Cards Best Balance Transfer Credit Cards Best Cash Back Credit Cards Best Credit Card Welcome Bonuses Best Credit Cards to Build Credit SELECT All Loans Find the Best Personal Loan for You Best Personal Loans Best Debt Consolidation Loans Best Loans to Refinance Credit Card Debt Best Loans with Fast Funding Best Small Personal Loans Best Large Personal Loans Best Personal Loans to Apply Online Best Student Loan Refinance SELECT All Banking Find the Savings Account for You Best High Yield Savings Accounts Best Big Bank Savings Accounts Best Big Bank Checking Accounts Best No Fee Checking Accounts No Overdraft Fee Checking Accounts Best Checking Account Bonuses Best Money Market Accounts Best CDs Best Credit Unions SELECT All Mortgages Best Mortgages Best Mortgages for Small Down Payment Best Mortgages for No Down Payment Best Mortgages with No Origination Fee Best Mortgages for Average Credit Score Adjustable Rate Mortgages Affording a Mortgage SELECT All Insurance Best Life Insurance Best Homeowners Insurance Best Renters Insurance Best Car Insurance Travel Insurance SELECT All Credit Monitoring Best Credit Monitoring Services Best Identity Theft Protection How to Boost Your Credit Score Credit Repair Services SELECT All Personal Finance Best Budgeting Apps Best Expense Tracker Apps Best Money Transfer Apps Best Resale Apps and Sites Buy Now Pay Later (BNPL) Apps Best Debt Relief SELECT All Small Business Best Small Business Savings Accounts Best Small Business Checking Accounts Best Credit Cards for Small Business Best Small Business Loans Best Tax Software for Small Business SELECT All Taxes Best Tax Software Best Tax Software for Small Businesses Tax Refunds SELECT All Help for Low Credit Scores Best Credit Cards for Bad Credit Best Personal Loans for Bad Credit Best Debt Consolidation Loans for Bad Credit Personal Loans if You Don't Have Credit Best Credit Cards for Building Credit Personal Loans for 580 Credit Score or Lower Personal Loans for 670 Credit Score or Lower Best Mortgages for Bad Credit Best Hardship Loans How to Boost Your Credit Score SELECT All Investing Best IRA Accounts Best Roth IRA Accounts Best Investing Apps Best Free Stock Trading Platforms Best Robo-Advisors Index Funds Mutual Funds ETFs Bonds. USA. INTL. watch live. Search quotes, news & videos. Watchlist. SIGN IN. Create free account. Markets. Business. Investing. Tech. Politics. CNBC TV. Watchlist. Investing Club. PRO. Menu. Economy. Jeff Cox. @jeff.cox.7528. @JeffCoxCNBCcom. WATCH LIVE. Nvidia earnings crystallized an important point for both markets and the economy: For better or worse, artificial intelligence is the future. The company guided it was expecting $11 billion in sales for the current quarter, largely driven by its leadership position in the AI chip-supplying business. A lopsided market reaction Thursday served as a reminder of a stratified economy in which technological benefits tend to spread slowly. In this article. NVDA. .IXIC. .SPX. Follow your favorite stocks CREATE FREE ACCOUNT. A blockbuster profit report Wednesday from Nvidia crystallized an important point for both markets and the economy: For better or worse, artificial intelligence is the future. Whether it's personalized shopping, self-driving cars or a broad array of robotics uses for health care, gaming and finance, AI will become a factor in virtually everyone's lives. related investing news. These are the next stocks to get an A.I. boost like Nvidia, according to Wall Street. Samantha Subin. Analysts scramble to raise price targets on Nvidia after super earnings. JPMorgan goes to $500. Hakyung Kim. Nvidia's massive fiscal first-quarter earnings helped quantify the phenomenon as the firm nears an elite cast of tech leaders with $1 trillion market valuations and clear leadership status both on Wall Street and in Silicon Valley. "AI is real, AI is not a fad and we're only in the early innings," said Steve Blitz, chief U.S. economist at TS Lombard. "Does it change the course of the economy over the next three to six months? Probably not. Does it change the economy over the course of the next three to six years? Absolutely, and in very interesting ways." Some of the changes Blitz foresees are reduced demand for foreign labor, a "point of sale" effect where coding and creative writing can be done by machines instead of people and a host of other activities that go beyond what appears obvious now. Development of products such as OpenAI's ChatGPT, a chatbot that converses with the user, has helped bring home the potential. "It's hard for me to overstate the value or the impact of AI, and it is in keeping with my view that this coming decade is all about the broader application of technology beyond what we've seen to date, beyond computers and phones, and that application has tremendous upside," Blitz said. Isolated effects so far. For Nvidia, the upside already has been apparent. As if profit of $1.09 a share on revenue of $7.19 billion , both well above Wall Street estimates, wasn't enough, the company guided it was expecting $11 billion in sales for the current quarter, largely driven by its leadership position in the AI chip-supplying business. Shares soared more than 26% higher around midday Thursday and the company's market value surpassed $950 billion. Broader market reaction, however, was underwhelming. While the S&P 500 semiconductor index jumped 11.4%, the broader Nasdaq Composite rose a more muted 1.7%. The S&P 500 was up about 0.9%, while the Dow Jones Industrial Average slipped more than 50 points as investors continued to fret over the debt ceiling negotiations in Washington. watch now. VIDEO. 4:05. 04:05. Squawk on the Street. At the same time, worries of an economic slowdown persisted — despite his excitement over AI, Blitz still thinks the U.S. is headed for recession — and the lopsided market reaction served as a reminder of a stratified economy in which technological benefits tend to spread slowly. "The spillover and the benefits that the rest of the economy will derive from AI is a multiyear, multidecade process," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "Is this an incremental piece to growth or is this now diverting spending from other things because every other part of the economy, outside of spending on travel, leisure and restaurants, doesn't seem to be going that well?" Boockvar pointed out small-cap stocks, for instance, were losing big Thursday, with the Russell 2000 off about 0.8% in early afternoon trading. 'Serious holes in the economy' That happened even though it seems those companies would benefit from the cost-saving aspects of AI such as the ability to reduce staffing expenses. Nvidia's chief competitor in the chip space, Intel , also was getting slammed, down 6.2% on the session. Quarterly tech earnings overall declined 10.4% heading into this week, according to FactSet, though some of the biggest firms did beat Wall Street's lowered expectations. "There are some serious holes in the economy that we can't ignore here," Boockvar said. "If the AI craze cools, people will see that the underlying business trends of Microsoft, Google and Amazon are clearly slowing because we all breathe the same economic air." AI hasn't been a winner for everyone, either. DataTrek Research looked at nine big AI-related companies that came to market through initial public offerings over the past three years and found their collective valuation is down 74% from their debut levels. The group includes UiPath , Pagaya Technologies and Exscientia . Their stocks have rallied in 2023, up an average 41%, but the seven-largest tech companies, a group that includes Nvidia, have surged an average 58%. "So far, Big Tech has collectively benefited most from the buzz around gen AI. We think this trend will continue given their ability to leverage their global scale and large competitive moats when utilizing this disruptive technology," DataTrek co-founder Nicholas Colas wrote. "Gen AI may end up making US Big Tech even bigger and more systematically important, rather than allowing upstarts to play the classic role of disruptive innovators." Indeed, market veteran Art Cashin noted without the big seven stocks, the S&P 500 would surrender all of its 8% gain this year. "You know, supposedly, the high tide lifts all boats," the director of floor operations for UBS said on CNBC's " Squawk on the Street ." "This is a very selective tide. And I'm not ready to throw out the confetti yet." watch now. VIDEO. 6:26. 06:26. Squawk on the Street. Subscribe to CNBC PRO. Licensing & Reprints. CNBC Councils. Select Personal Finance. CNBC on Peacock. Join the CNBC Panel. Supply Chain Values. Select Shopping. Closed Captioning. Digital Products. News Releases. Internships. Corrections. About CNBC. Ad Choices. Site Map. Podcasts. Careers. Help. Contact. News Tips. Got a confidential news tip? We want to hear from you. Get In Touch. Advertise With Us. Please Contact Us. CNBC Newsletters. Sign up for free newsletters and get more CNBC delivered to your inbox. Sign Up Now. Get this delivered to your inbox, and more info about our products and services. Privacy Policy. |. Do Not Sell My Personal Information. |. CA Notice. |. Terms of Service. © 2023 CNBC LLC. All Rights Reserved. A Division of NBCUniversal. Data is a real-time snapshot *Data is delayed at least 15 minutes. Global Business and Financial News, Stock Quotes, and Market Data and Analysis. Market Data Terms of Use and Disclaimers. Data also provided by.