Market Outlook

December 1, 2024

ChatGPT Answers My More Pressing Questions

The conventional wisdom about companies is that tomorrow’s winners belong to whomever invests the most now in artificial intelligence (AI). More specifically, that capital must be used to build “super clusters” of computer servers powered by NVIDIA chips.

With so much riding on AI, I’m handing this month’s column over to the version of ChatGPT that runs on my iPhone 13. In recent months, it has attempted various tasks for me (with very mixed results), ranging from questions on sports (“Was Ted Williams or Joe DiMaggio the better player?”) to design ideas for a detached garage with a roof deck (it struggled mightily there!).

With the two-year-old ChatGPT reportedly powered by 100,000 or so NVIDIA chips, and a number of Fidelity growth funds having considerable stakes in that firm, my first two questions (in italics) seem fitting. (Note: Q&As have been edited for space and clarity.)

Q: Are there any serious rivals to NVIDIA’s AI chips?
A: Yes, several companies are emerging as serious rivals, including AMD, Google, Intel, Apple and Amazon.

Q: How high will NVIDIA’s stock climb in 2025 (it ended November at $138.25 a share)?
A: Predicting a stock’s share price is inherently uncertain. Some risks and challenges are competition, geopolitical, valuation concerns, and economic factors.

Q: OK, something simpler: Will the S&P 500 rise or fall in 2025?
A: Predicting whether the market will rise of fall next year is highly speculative, as it depends on many factors (see above), plus interest rates and corporate earnings.

Q: Let’s try something narrower: What’s the outlook for technology stocks next year?
A: The outlook remains promising but comes with a mix of opportunities and risks.

Q: I’m feeling the need for some detail. Let’s try this: Will value stocks outpace growth stocks in 2025?
A: The bull case for value is if inflation remains sticky or the Fed maintains high interest rates, value stocks (banks, energy and consumer staples) could see stronger performance.

Q: Rank from best- to worst-performing the 11 S&P sectors for 2025:
A: The following ranking reflects current projections (from two sites): Technology, consumer discretionary, industrials, financials, energy, health care, real estate, materials, communication services, utilities and consumer staples.

Q: Call me skeptical! Let’s get more topical: Are tariffs inflationary?
A: Yes, and here’s why: They act as a tax, increasing their price. Businesses importing these goods may pass the higher costs onto consumers. Tariffs also reduce competition, disrupt supply chains and result in retaliatory tariffs.

Q: Finally (and let’s not shoot the messenger!), but how have stocks performed when Republicans controlled the presidency and both houses of Congress?
A: Historically ... mixed. Data from studies analyzing market performance under different political configurations suggest that the stock market tends to perform slightly better under a divided government. This is partly because gridlock reduces the likelihood of significant regulatory or tax changes that could disrupt the markets.

— John Bonnanzio