BlackRock Investment Institute has recently declared that artificial intelligence (AI) is a “mega force” that could create significant returns for investors in today’s market. According to their mid-year outlook report, AI-focused companies will be a major driver of returns for developed markets in a tough economic environment. The institute has an over-weight allocation for AI-related shares in developed markets, citing an unusually concentrated rally in a handful of technology stocks.
BlackRock’s investment team believes that the most obvious benefit of AI lies in automation, which could significantly boost profit margins, especially for companies with high staff costs and an abundance of easily-automated tasks. While white-collar jobs are at an increased risk of being automated away, the resulting cost savings could outweigh the risks.
The institute also expects central banks in developed economies to keep rates steady at a high level regardless of possible episodes of financial instability. BlackRock remains overweight short-term U.S. government bonds as it expects.
BlackRock’s thesis for increased investment in AI is based on multiple “disruptive” themes that could see the sector grow rapidly over the coming years. The rapid and varying developments in the field of AI are simply “too interesting to ignore,” according to Matt Huang, the CEO of crypto investment firm Paradigm.
BlackRock’s Investment Institute sees AI as a major driver of equity returns in today’s market. With an over-weight allocation for AI-related shares in developed markets, BlackRock believes that AI could be a big driver of returns even when the macro environment is not favorable.