I have developed a fascination with one of the biggest life-changing events that has enveloped our economy, and our lives, and offers infinite promise: A.I. As I have written in the past, I have witnessed three life-changing events in my 50-plus-year career: the invention of the personal computer, the advent of cellular telephony and the Internet. Each of these drove productivity to new levels, and we cannot imagine our lives today without smartphones, tablets and the ubiquitous availability of Wi-Fi.
A.I. is in that same realm, and offers the possibility of yet another quantum leap forward in productivity. And remember, A.I. is so new, it is in the bag phone era in terms of development. It is hard to imagine what A.I. will look like, and what it will power, 10 years from now.
At a recent national trade association meeting, the software providers to the construction materials industry were challenged to present their views of what A.I. will mean to our industry in the future. The sweeping progress of A.I. and the resulting productivity gains will likely drive our economy to new heights, just as the major advances that preceded them did. As we all recall, the adoption of the Internet drove the U.S. economy to years of new heights and prosperity in the 1990s.
Impact on Stocks. And the impact on stock markets was equally impressive, as the dot-com bubble drove markets to spectacular highs. Well, the same will probably happen here. With the promise of A.I. driving so many stocks higher, all three major markets could benefit substantially by a broad rally in stocks driven by the A.I. boom.
Take the S&P 500, for example. It took more than two years to gain its last 1,000 points, but there is an increasing number of Wall Street strategists that believe this time, it could take less than a year. As the S&P 500 recently surpassed 5,000 and continued to hit new records, some strategists have raised their 2024 year-end targets as Big Tech earnings and the U.S. economy continue to surprise with consensus to the upside. A couple of notable firms are making a case that if Big Tech earnings continue to outperform projections, the bullish case of 6,050 for the S&P 500 is likely.
One firm predicted the 2025 forecast of 6,500 for the index, based on a premise that its valuation will reach a similar level to its peak during the dot com mania. Some say the bubble in the S&P 500 that is forming now resembles the bubble that formed in the second half of the 1990s in many aspects, not the least of which is capturing the future benefits of a transformative technology.
If that is the case, its valuation remains far short of what it reached back then, suggesting that it has plenty more room to inflate. The NASDAQ and the Dow Jones Industrial Average will both benefit as well, as they did previously during the giddy times of productivity gains.
What does this mean for our industry? As we all know, almost every one of the multi-nationals that set the financial performance tone for our industry made 52-week high in 2023, and all have since climbed further, reaching all-time highs in most instances.
While this portends favorably for the individuals that own these stocks, it has an even greater impact on our industry, as A.I. could easily be the silver bullet that helps relieve the strain of labor shortages as it merges with autonomous driving, offering the possibility of greater volume delivered from a fewer number of employees.
I never dreamed when I had my cellphone mounted to the console of my car in the early 1990s that I would see anything like the iPhone. A.I. is like those early phones … we can’t even imagine what it will evolve into.