Where’s the Beef?

Having been through the third quarter earnings reports and into the fourth quarter guidance, one must ask, “where is the beef?” Or said differently, the expectations for accelerated revenue and earnings growth attributed to the AI (artificial) revolution have yet to materialize.  Except for a few companies that are leading the charge, Nvidia, Salesforce, Broadcom, Marvel, and ServiceNow, to name a few, broader participation has yet to show up.

Yet the bull market remains largely intact.  Investors are looking over the December quarter and are counting on improved growth performance starting in 2025.  Moreover, broad based enthusiasm over the change in administration and its policies is cushioning the disappointing current growth expectations.  Interest rates are rising, crushing biotech stocks, and inflation fears continue to run hot.  Ultimately, investors are counting on the productivity and deflationary possibilities of AI to put these fears in check.  We shall see.  But if these things don’t start happening in early 2025, what has been a great investor party, could turn into a severe hangover. 

Our bet, the AI revolution will in fact playout but with some start and stops relative to timing.