This week, investors continue to pay close attention to everything related to artificial intelligence (AI) and the fears its rise has generated in financial markets. Although these fears have been present for some time, detailed analysis reveals contradictions that call their coherence into question, as noted by various voices in the sector. On one hand, there is ongoing concern that the massive investments in AI may not yield the expected returns. This fear has intensified following the recent results from major tech companies, which have announced significant increases in their capital expenditures, sometimes accompanied by new debt issuances. This is not a new concern, but a cyclical one that resurfaces with each relevant news item. Additionally, the high degree of interconnection among major tech firms fuels fears of a potential domino effect if the supposed AI bubble were to deflate, although the market does not currently consider this likely. This potential bubble scenario is exacerbated by the imminent IPOs of companies like Anthropic, OpenAI, or SpaceX, whose valuations are difficult to justify. If the market perceived a real bubble, the impact could quickly extend to other sectors. The second major fear in the market is different: the possibility that AI could lead to massive job losses and even the disappearance of entire companies. This fear has been reflected in stock declines of software companies following the launch of new solutions from Anthropic, or in the insurance sector after the agreement between Insurify and OpenAI to implement ChatGPT in car insurance comparisons. Ipek Ozkardeskaya, senior analyst at Swissquote, summarizes the paradox: “If AI is about to eliminate entire sectors and companies, then massively investing in AI would make sense.” Thus, the second fear could neutralize the first, as the so-called “Great Replacement”—the replacement of people and companies by AI—would enhance returns on investments in this field. Therefore, Ozkardeskaya argues that both fears cannot fully coexist: “If the concern is that the benefits of AI will take time to materialize and the transition will be gradual, betting on the immediate disappearance of companies makes no sense.” In other words, both scenarios are difficult to sustain simultaneously. Still, the expert believes that major tech companies linked to AI are trading at high multiples and that a downward correction was foreseeable, estimating a plausible additional decline of 10% to 20%. However, she warns that the anxiety and massive sell-offs seem exaggerated, as many companies will benefit from increased productivity and lower costs, which could lead to consolidation processes, but not to the immediate disappearance of businesses. Some opportunities are already trading at attractive discounts, such as Adobe, whose P/E ratio is around 15 times. In conclusion, Ozkardeskaya expects valuations between the tech sector and the rest of the market to converge, and that sector rotation could ease downward pressure on indices. “The lower the exposure to technology, the more moderate the decline will be,” she concludes. (Source: bolsamania.com)