When Wall Street catches a whiff of a new innovation that could drive earnings growth, it tends to get a little overexcited. Sell-side analysts at investment banks rush to put out bullish research reports on related companies; economists and strategists start discussing the potential impacts of the new tech for growth, inflation, and productivity; and money managers begin to ponder the implications of it all for their portfolios. It’s a flurry of activity and interest that can quickly turn into a self-reinforcing hype cycle featuring highly optimistic forecasts.
The rise of artificial intelligence is the latest example of how the Street can become attached to a new technological advancement. The widely successful release of OpenAI’s chatbot ChatGPT in November sparked a wave of enthusiasm about generative AI’s potential to reshape the world, usher in an age of abundance, or even cure the incurable—all while boosting worker productivity and reducing corporate costs. Ever since, analysts have been watching for signs of AI’s impact on corporate earnings, particularly when it comes to big tech, and firms that show promise in drawing in new AI-related revenues (like Microsoft or Nvidia) have seen their stocks soar. Meanwhile, there's been a steady stream of research reports and studies pouring out of Wall Street that push (and only occasionally downplay) the AI hype.
