Billions spent and hypothetical returns: the AI boom explained with six charts

1. AI has sent stocks soaring The S&P 500, which tracks the 500 biggest US companies, has been on a tear over the past five years – rising by nearly 80%. That jump has been driven by big tech stocks with a stake in the AI boom, the “magnificent seven” of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. . The investor concentration on technology is unprecedented, says Jim Bianco of the US company Bianco Research, which found that 41 AI-related stocks now account for nearly half the S&P 500’s market value. Neil Wilson, an analyst at the investment platform Saxo UK, says the prospect of a 1970s-style inflation shock, lofty tech valuations in general and a potential freeze in the private credit market do not bode well for stocks. “The entire market has become one giant AI edifice,” he says. “The danger is a repeat of the dotcom bubble – a huge crash, and years of lost returns. By some measures valuations aren’t as stretched as then but this looks like an incredibly dangerous market.” 2. Expenditure is growing at a staggering rate Spending on AI – from datacentres to chips – is racing ahead, from $765bn this year to $1.6tn in 2031, according to Goldman Sachs. The investment bank acknowledges there could be problems with this scale of commitment. What if the datacentres are delayed? . …