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How AI Influences Stock Markets More Than Inflation Data: Key Insights

How AI Influences Stock Markets

Nvidia’s upcoming fourth-quarter earnings results, scheduled to be reported on Wednesday, are widely viewed as an important gut check for the recent technology-led rally in the stock market, fueled chiefly by investor enthusiasm for artificial intelligence.

“There’s a reason why the stock market is not really all that dominated by CPI, PPI, and inflation prints… It’s because of AI,” said Michael Antonelli, Managing Director and Market Strategist at Baird, in an interview with Yahoo Finance Live. “AI has essentially sucked all of the oxygen out of the room. It’s just absolutely on everybody’s mind.”

Nvidia’s shares have skyrocketed over 230% over the past 12 months, vastly outpacing the broader market, as investors bid up stock prices in anticipation of surging demand growth for AI applications ranging from cloud computing to autonomous vehicles. The company’s graphics processing units (GPUs) are considered vital for AI model training.

Antonelli cautions, however, that Nvidia’s lofty valuation leaves little room for disappointment when it reports fiscal fourth quarter results after the bell on Wednesday. “Trying to hold up these lofty expectations is going to be a challenge. There’s definitely a lot baked into the stock,” he said.

Still, the intense focus on AI and related technologies has overshadowed concerns over stubbornly high inflation and signals from the Federal Reserve pointing to an eventual pause in interest rate cuts, Antonelli noted.

“That’s what markets do every now and then; they get obsessed over something. So, we’re ignoring inflation just because of the AI thing,” he remarked.

While the performance of high-flying momentum stocks like Nvidia will continue to be closely monitored in the near term, Antonelli pointed to strengthening consumer sectors as areas of the market with attractive upside potential.

“Consumer discretionary stocks, consumer staples stocks, and consumer stocks are doing really well. I thought that was very, very fascinating what [Walmart] said. Look at their chart. Look at what they talked about: a stronger consumer in their earnings release,” he said, adding that industrials also remain well-positioned to benefit from steady economic expansion.

“Does that sound like a market that’s being led by only seven names? Walmart is up 14% year-to-date. It’s a massive company. All right. That’s not one of the Magnificent Seven. Is it?” Antonelli concluded.


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