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A world labor scarcity of about 80 million employees will make tech shares go parabolic, based on Fundstrat’s Tom Lee.
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Lee argued that the expertise sector will ultimately make up 50% of the S&P 500.
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“I feel AI is absolutely addressing a worldwide labor scarcity of roughly 80 million employees by the top of 2030,” Lee mentioned.
A world labor scarcity of about 80 million employees by the top of 2030 goes to ship expertise shares hovering, based on Fundstrat’s Tom Lee.
Lee mentioned in a video to shoppers final month that he expects the expertise sector will develop to 50% of the S&P 500 from its present weight within the benchmark index of round 30%.
Lee made the feedback shortly after Nvidia posed a blockbuster first-quarter earnings report, which despatched the inventory hovering to report highs. Nevertheless, based on Lee, it is nonetheless early days for the AI story as a result of it’ll assist increase productiveness and deal with a looming labor scarcity downside.
“The prime age workforce is rising slower than the full world inhabitants and by the top of the last decade that hole is round 80 million employees. So except there’s a productiveness increase which is what AI will do, it may create numerous strain on firms or incentives for them to innovate. And meaning you are going to see a shift from annual wage spend to silicon spend,” Lee mentioned.
Lee estimates that firms will spend roughly $3.2 trillion per yr on AI tech to handle the rising labor scarcity.
Nvidia, which is approaching about $120 billion in annual income, stands to learn from that spending in a giant method, Lee mentioned.
This is not the primary time a worldwide labor scarcity has led to a parabolic transfer greater in expertise shares as tech firms helped increase productiveness.
“Between 1948 and 1967 there was a worldwide labor scarcity and expertise shares went parabolic. And between 1991 and 1999 there was a worldwide labor scarcity and expertise shares went parabolic, so that is what’s taking place immediately,” Lee mentioned.
And as as to whether Nvidia is in a bubble much like the dot-com bubble, when shares of Cisco soared to report highs on the promise of the web, Lee put issues into perspective.
“Have in mind Nvidia sells a $100,000 chip because it’s scarce, nobody else actually sells it. In contrast Cisco offered a $100 router throughout the web increase, and but they bought to a 100x P/E. I feel Nvidia’s 30x P/E appears fairly engaging and that is why we expect it is early days,” Lee mentioned.
This story was initially printed in Might 2024
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