Magnificent seven stocks have driven the broader market higher over the past two months. Investors can take heart in knowing that artificial intelligence (AI) adoption is alive and well.
Central to the veracity of that theme and to the fortunes of AI-heavy ETFs, including the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ), is adoption. Long gone are the days in which market participants would buy into the “AI hope” trade. Now, investors require tangible results to justify often lofty multiples.
Adoption produces those results. AI adoption is essential; hyper-scalers, including QQQ/QQQM member firms, are spending billions of dollars to bring new products to market. Within the investment community, those expenditures are only justified when it’s clear there are viable end markets. Fortunately, that appears to be the case.
Diverse Array of Industries Embracing AI
In what could be positive for AI-related names, AI adoption isn’t just a tech story. Yes, artificial intelligence is rooted in tech. However, it has broad field of industry-level adopters.
“As adoption spreads across sectors like financials, industrials and healthcare, AI is becoming less of a standalone theme and more of a performance lever,” according to J.P. Morgan Asset Management. “In a landscape shaped by heightened policy uncertainty and moderating economic growth, how companies use that lever may ultimately define who leads and who lags behind.”
As the asset manager points out, generative AI – the most common form of AI available today –has myriad use cases. Currently, workers in the 18-to-64 age range use generative AI for tasks such as written communication, fact-checking, coding, translation, and tutoring.. That confirms AI adoption is solid and has room to grow.
Confirming the broad set of sector-level uses for AI, the technology has already gained significant traction in the financial services, healthcare and industrial sectors, among others.
“Roughly one-quarter of workers report regular AI usage, but many still operate in environments without clear AI guidelines or structure in place,” adds J.P. Morgan. “Workers may be using AI to save time, but how they use that time is often left to the individual. The next phase of adoption will likely involve more structured integration, as companies define governance, raise expectations and set their sights on measurable productivity gains.”
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