Unless you are completely off the grid, you are unlikely to go more than 30 minutes without AI pestering you. Whether it be through using ever changing AI-chatbots or being inundated by commercials. The ‘experts’ claim AI is here to make all of our lives better. But who is actually benefiting?
For recent college graduates, AI might have made writing papers and passing classes in college a breeze. Finding a job? Forget about it. The unemployment rate for this cohort continues to tick higher each month reaching levels not seen in well over a decade. Do not worry, ChatGPT or Gemini have the answer. From Gemini, “Recent college graduates can best get a job by leveraging their university’s career services, networking strategically (bolding added by author), targeting high-demand fields, and acquiring in-demand skills through supplemental training.” Time to do things the old fashioned way and interact face-to-face again. Claude will be there waiting for you when you get back home.
For low-income households, AI might not be replacing their service or manual labor jobs (per ChatGPT), but it is beginning to impact their utility bills (and not in the direction you hope). US data center build outs are anticipated to grow by over 100% through the next five years. Utility rates have been climbing faster than the rate of inflation. But remember, the Fed wants you to exclude food and energy from the inflation calculation. Low-income households already pay 8-10% (per Gemini) of their income on household energy bills. Average utility rate increases are anticipated to be in the low double digits to support the AI infrastructure buildout.
For investors, they are enamored with AI. Nvidia is up nearly 1,000% since ChatGPT launched. The tech focused Nasdaq is only up 100% since AI-day (November 30, 2022). S&P 500 forward P/E multiples have only been higher in 1999 and 2000. Add .AI to the end of your company’s name, instant jump in share price. Total AI focused capital expenditures since AI-day have exceeded $1 trillion, with the potential for another $600 billion spent globally in 2026 alone (per Gemini and ChatGPT).
Our take? Time to cash in some of these AI stock gains. Put ChatGPT, Gemini and their friends to the test on how to take your gains from trimming back stocks to work. Take the family on a ‘bucket list’ trip. Ask your favorite AI-chatbot: Where can we stay when we see the world’s largest frying pan? Surprise your favorite non-profit with a stock donation or two (and maybe save a little on taxes in doing so). What is the point of stacking up all that sweet AI cash if you do not use it in the real non-AI world? Maybe these AI models think trees do truly grow to the sky.
All-time highs feel great, but your financial goals should remain the most important factor to consider when looking at your investments. Now is a good time to review your goals and asset allocation – as high prices may present opportunity to rebalance.
Andrew Messerschmidt, CFA, is an Investment Officer at Cedar Rapids Bank & Trust. His direct line is (319) 743-7136.
