Key elements of the article:
- Excitement for generative artificial intelligence sparked by OpenAI’s chatbot was the dominant theme for investors in 2023.
- The Nasdaq Composite jumped 43% for the year—its second-best annual performance in 15 years.
- Technology and e-commerce companies on the S&P 500 averaged a gain of 57%, more than double the broad index’s overall performance for the year.
- Indexes tracking subsectors such as chips and software recorded their best annual gains since 2009.
- However, doubts about the real-world impact and commercial viability of AI have started to emerge.
- Some investors are concerned that the current focus on AI is creating a hype bubble similar to the dot-com boom.
- AI-driven startups are facing challenges in generating meaningful revenue and achieving profitability.
- There is a risk that investors will become disillusioned with AI and its potential.
- Companies need to demonstrate tangible results and commercial applications for AI in order to sustain investor interest and confidence.
Technology stocks have started the year with a selloff after experiencing significant gains in 2023 driven by excitement around generative artificial intelligence (AI). The Nasdaq Composite rose 43% last year, its second-best annual performance in 15 years. Technology and e-commerce companies on the S&P 500 saw average gains of 57%, more than double the overall performance of the index. Indexes tracking subsectors such as chips and software also experienced their best annual gains in over a decade. However, doubts about the commercial viability and real-world impact of AI have started to emerge, leading some investors to worry that the current focus on AI is creating a hype bubble similar to the dot-com boom. AI-driven startups are grappling with challenges in generating meaningful revenue and achieving profitability. To sustain investor interest and confidence, companies need to demonstrate tangible results and commercial applications for AI. There is a risk that if AI fails to deliver on its potential, investors may become disillusioned and the AI hype could start to fade.
Read the full article here – https://www.wsj.com/finance/stocks/techs-ai-hangover-might-just-be-getting-started-e81ca9f9