AI sector drives half of gains in current bull market, analysis shows

Artificial intelligence (AI) is rapidly reshaping the business and financial landscape, moving at a pace observable to the naked eye, unlike the slow progress of natural glaciers. Leading AI labs in the US and China are continuously releasing increasingly powerful language models, both closed and open-source.

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AI can be imagined as a powerful glacier that is reshaping our business and financial everyday lives with its unstoppable destructive power. But unlike glaciers that move an inch per hour, the AI glacier is so fast that we can observe its progress with the naked eye.

While the constant discussion of AI can become tiresome, it represents the most significant technological revolution of our time. This rapid advancement is occurring on a steep part of the S-curve, marked by multiple independent technological breakthroughs. For instance, improvements in hardware, software efficiency, model effectiveness, and intelligence could lead to a 40-fold annual increase in usable intelligence per watt.

Some economists, scientists, and figures like Elon Musk are seriously discussing science-fiction-like growth models, suggesting a potential super-exponential growth phase within the next decade. Such advancements could theoretically double economic growth in just a few years, driven by the complete automation enabled by powerful AI and millions of robots.

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We must be aware that the most groundbreaking technological revolution of our time is taking place before our eyes, a unique event approximately like we Slovenians have the unique and unrepeatable privilege in cycling to admire Tadej Pogačar, the greatest cyclist of all time, at the peak of his career.

Empirical analysis of financial markets undeniably confirms AI's dominance as the most important investment story. Among the top ten global companies by market capitalization, all are heavily involved in AI infrastructure. Within the top twenty, exceptions like Apple, pharmaceutical giants (Eli Lilly and Johnson), financial firms (JP Morgan and Berkshire), and oil company Exxon highlight the trend.

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Some economists, scientists, and even Elon Musk are seriously discussing science-fiction-like growth models, according to which super-exponential growth could occur as early as the next decade.

Since the last bull market began in October 2022, global stock markets have gained approximately 90 percent. The IT sector alone contributed nearly half of this return, with semiconductors accounting for just under a third and hardware for a tenth. Companies systematically and aggressively investing in AI are outperforming others, with AI driving corporate profit growth in the second quarter. Bank of America data shows AI-related stocks achieved 28 percent profit growth, compared to other stocks.

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Empirical analysis of the movements in financial markets undoubtedly confirms the complete dominance of AI as the most important investment story.