What's market’s current pricing of AI

The fx168 mobile Forex website homepagemarket's enthusiasm for AI-related stocks has been significant since 2023, with the "Mag 7" stocks surging by an impressive 44.7%. However, this rapid rise has sparked debates about whether AI is merely a bubble reminiscent of the dot-com mania or if it truly represents the driving force behind the next industrial revolution.

In a note to clients Monday, AlpineMacro said that to understand how much of this optimism is already baked into stock prices it developed a proprietary AI-Relevance Indicator (ARI).

They explain that the ARI gauges the exposure of companies to AI by analyzing the frequency of AI-related terms in their earnings calls.

This approach allows AlpineMacro to assess the premium the market has currently priced in for AI-related expectations.

According to the firm, AI has significantly influenced valuation multiples.

Their analysis suggests that without AI, the trailing P/E ratio for the average S&P 500 company would be 26.3 instead of the current 28, indicating a 6% premium due to AI.

Similarly, the forward P/E ratio, which currently stands at 23, includes a 4% boost from AI, translating to 0.9 additional points.

They add that the impact of AI on growth expectations is also notable. The market anticipates a 4.1% sales growth for the average S&P 500 firm over the next year, but without AI, this figure would drop to 2.7%.

In terms of EBITDA, AI is expected to boost growth by 2.1 percentage points, with the market projecting a 16.2% increase compared to 14.1% without AI influence.

The firm's findings underscore that AI has added a substantial premium to market expectations, justifying higher valuations across the board.

Statement: The content of this article does not represent the views of FTI website. The content is for reference only and does not constitute investment suggestions. Investment is risky, so you should be careful in your choice! If it involves content, copyright and other issues, please contact us and we will make adjustments at the first time!