Wall Street remained puzzled about the US economy’s continued resilience in the face of interest rate hikes by the Federal Reserve, with some predicting a recession soon.
But Steve Eisman, senior portfolio manager at Neuberger Berman, is bullish on financial markets and believes the answer is clear: the pessimists are wrong as the AI race and the boost in infrastructure projects drive the economy.
He added: “We are moving forward, and I think the only conclusion that can be reached is that the American economy has become more dynamic than at any time in its history.” He told CNBC on Thursday.
Eisman, whose famous bet against toxic mortgages led to the Great Financial Crisis The big shortHe added that the next stage in the technology narrative will be consumers purchasing new phones and laptops that support artificial intelligence.
this means applewhich only Unveiled a series of new AI featureswill witness a massive customer update cycle Upgrade their iPhonesAnd he expected.
Eisman added that his company has begun looking for other stocks that will benefit from the artificial intelligence trend, but stressed that investors should stick with any Apple stock they own.
“Definitely hold your ground at Apple,” he said. “She is a very central character in the whole story.”
Microsoft And Google Parent company Alphabet, which develops separate AI technologies, is also a “core holding,” but Eisman also raised a question he was trying to answer.
One interesting hypothesis posits that if AI becomes as successful as people expect, he said, the cost of creating software will “explode,” meaning the competitive advantages enjoyed by some companies will no longer be impenetrable.
“So you can make an argument that the hardware will continue to be re-evaluated and that some parts of the software will degrade,” he added.
In other words, the tech hardware companies that power the AI sector should continue to thrive, but not software stocks.
Nvidia’s massive rise has been an example of the recent shift toward hardware stocks. Shares of the leading AI chip company are up 166% year to date, and are up more than 200% from this time last year, making it a leading AI chip company. A $3 trillion company This represents More than a third of the S&P 500’s gains this year.
And Nvidia’s quarterly earnings And the rush to stockpile AI chips shows no sign of slowing down.
But too much reliance on a single stock also represents a major risk, warns Apollo’s chief economist, Torsten Slok.
“Such a high concentration means that if NVIDIA continues to rise, things will be fine.” he wrote in a note on Wednesday. “But if it starts to decline, the S&P 500 will be hit hard.”
This story originally appeared on Fortune.com