Close Menu
  • Home
  • Economic News
  • Stock Market
  • Real Estate
  • Crypto
  • Investment
  • Personal Finance
  • Retirement
  • Banking

Subscribe to Updates

Get the latest creative news from FooBar about art, design and business.

What's Hot

D.C.’s Most Expensive Home Sales of 2025 So Far

July 31, 2025

Blockchain Could Boost Covered Bonds, but Adoption Faces Major Hurdles: Moody’s

July 31, 2025

Pi Network price prediction for August 2025 – Can it reverse 75% losses? 

July 31, 2025
Facebook X (Twitter) Instagram
  • Contact Us
  • Privacy Policy
  • Terms Of Service
Thursday, July 31
Doorpickers
Facebook X (Twitter) Instagram
  • Home
  • Economic News
  • Stock Market
  • Real Estate
  • Crypto
  • Investment
  • Personal Finance
  • Retirement
  • Banking
Doorpickers
Home»Stock Market»US stocks are overvalued because of unrealistic expectations for AI-powered economic growth, Vanguard says
Stock Market

US stocks are overvalued because of unrealistic expectations for AI-powered economic growth, Vanguard says

August 24, 2024No Comments3 Mins Read
Facebook Twitter Pinterest LinkedIn Tumblr Email
Share
Facebook Twitter LinkedIn Pinterest Email

Investors expect an AI economic boom to happen quicker than it likely will, Vanguard said.Getty Images; Jenny Chang-Rodriguez

  • Investors are too optimistic about the near-term prospects of AI, Vanguard said.

  • Firms would need to growth profit by 40% annually for the next three years to match valuations, the firm said.

  • “This is double the annualized rate of the 1920s, when electricity lit up the nation,” Vanguard wrote.

With tech companies still pushing the boundaries of artificial intelligence, market excitement for it seems endless.

But this enthusiasm expects too much from the technology in too little time, Vanguard wrote on Thursday.

Wall Street is rife with upbeat forecasts about what AI could do to the economy and corporate profits. Most of them are pinned to a US workplace revolution and a productivity boom.

That optimism has helped fuel strong stock gains, with the benchmark S&P 500 up 18% year-to-date through Thursday.

But Vanguard global chief economist Joe Davis thinks expectations are too high, and says that stocks are overvalued even if the AI boom plays out as anticipated.

He estimates that US corporate profits would have to growth by 40% annually over the next three years to justify where stocks are trading now. For context, the S&P 500’s trailing one-year earnings growth rate through the second quarter of 2024 was 10.9%, according to FactSet data.

“I’m optimistic about the long-term potential of artificial intelligence to power big increases in worker productivity and economic growth,” global chief economist Joe Davis wrote. “But I’m pessimistic that AI can justify lofty equity valuations or save us from an economic soft patch this year or next.”

He continued: “This is double the annualized rate of the 1920s, when electricity lit up the nation — not to mention economic output and corporate income statements.”

Such a historic surge in corporate performance looks even less probable if the economy cools down next year. Vanguard expects GDP to expand by just 1% to 1.5% in 2025.

It’s not that the investment firm has no faith in AI’s potential — its research suggests 45% to 55% odds that AI will trigger a boom in labor productivity. Between 2028 and 2040, that could spur a 3.1% annualized rate of US growth in real terms.

But investors need to let go of any notions that this will happen immediately, Davis said. While firms have poured billions to advance their position in the sector, some market players are incorrect in thinking that AI investing will reach $1 trillion in the near term:

“$1 trillion in AI investment by 2025 would require 286% growth. That’s probably not going to happen, which means we’re unlikely to experience an AI-driven economic boom in 2025,” he said.

Some on Wall Street are much more pessimistic. BlackRock has said there’s a strong chance that heavy AI investing will trigger higher inflation before any production boom can come. That could erode corporate profit growth.

Read the original article on Business Insider

AIPowered Economic expectations growth overvalued stocks unrealistic Vanguard
Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

Related Posts

How to get free stocks: 6 ways to earn free shares

July 27, 2025

Housing inventory growth is starting to stall

July 27, 2025

How to buy stocks online

July 24, 2025
Add A Comment
Leave A Reply Cancel Reply

Top Posts

Aptos analysis: Bearish signs emerge despite price recovery

August 21, 20240 Views

What is a bond ETF and is it a good investment?

May 23, 20251 Views

The Real ID Alternatives Travelers Might Already Have

April 21, 20251 Views
Stay In Touch
  • Facebook
  • YouTube
  • TikTok
  • WhatsApp
  • Twitter
  • Instagram
Latest
Real Estate

D.C.’s Most Expensive Home Sales of 2025 So Far

July 31, 20250
Crypto

Blockchain Could Boost Covered Bonds, but Adoption Faces Major Hurdles: Moody’s

July 31, 20250
Crypto

Pi Network price prediction for August 2025 – Can it reverse 75% losses? 

July 31, 20250
Facebook X (Twitter) Instagram Pinterest
  • Contact Us
  • Privacy Policy
  • Terms Of Service
© 2025 doorpickers.com - All rights reserved

Type above and press Enter to search. Press Esc to cancel.