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Fears of an AI “bubble” are overdone, proclaimed senior strategists at Hudson Bay Capital, the $20bn multi-manager, in London this week.
Speaking at the Sohn London investment ideas conference, Jason Cuttler, senior markets and derivatives strategist, and Nouriel Roubini, senior economic strategist, outlined their “tech trumps tariffs” case.
Roubini described the current wave of technology advances as the “most important in human history,” not just in terms of AI/machine learning, but fourteen other areas of innovation ranging from humanoid robots to semiconductors and quantum computing and blockchain.
Speaking on a joint panel with Amy Flikerski, head of external portfolio management at CPPIB, Cuttler said he had a 9,000 price target on the S&P 500.
His case was driven by the notion that market fears of a sell-off, driven in part by the price/earnings ratio being back at prior peaks, ignored huge structural shifts holding greater upside.
He highlighted that the past 20 years had been characterised by pessimism but stocks have been been hitting record highs; and that lower bond yields today demonstrated why equities should trade materially higher.
The biggest wave of inheritance in human history is also about to start, with the new generation of recipients far likelier to invest into stocks than previous generations.
He said the conventional wisdom that we are entering a period of geopolitical chaos underplays the chances that actually continued US hegemony could be set to endure.
“Stocks have plenty of upside if this optimism takes hold, which we think it will.”
He added: “It gives us a conviction in the trend, which is really important because when you get dislocations and other people are afraid, it gives you the opportunity to step in on the other side. Second, when we think about those derivative distributions, that’s right in our wheelhouse. We love that stuff.
“Third, we do a lot of work on correlation and co-movement, how different assets move together. And it’s a slightly esoteric corner of the derivatives market, but we have some intellectual property statistics, which allow us to map how different assets are actually moving relative to one another in a more robust way than traditional correlation metrics… we can really monetise this prices of those derivative markets that allow us to tap into really interesting upside convex asymmetric trades.”