JPMorgan: 30 AI stocks driving $180 billion in consumer spending
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Aïda Amer/Axios
The rip-roaring performance of just 30 AI-linked stocks may be driving nearly $200 billion in annual consumer spending, according to a new report from JPMorgan economists.
Why it matters: The overall economy has become increasingly dependent on AI-driven growth, most notably through investment in data centers and software. But the "wealth effect," in which higher asset prices make consumers more willing to spend money, is part of the story as well.
- Consumer spending has remained solid this year despite a weakening job market — and the impact of of surging AI-related stocks on Americans' behavior is a significant factor, at least among those households that own stocks.
- It is one more way that the overall economy could prove vulnerable if AI investment — and the stocks that are benefiting — experience a correction.
By the numbers: The JPMorgan team estimates that U.S. households have gained $5.2 trillion in wealth over the last year from the appreciation of a basket of just 30 stocks tied to AI.
- Based on past research into how higher asset prices fuel consumer spending, that implies a $180 billion increase in overall annual spending, a 0.9% rise.
- That's only a modest share of the 5.6% rise in overall spending over the last 12 months (not inflation-adjusted), but it's a stunning result from so few companies' share prices.
- The economists note that the impact could be larger if AI-related enthusiasm is also propping up the value of other stocks or real estate.
Between the lines: Stock ownership is concentrated among the affluent, so the role of wealth effects in driving consumer spending helps explain some of the contradictions evident in the economy right now.
- Overall consumer spending has remained strong, but it has been held up by high earners, with more signs of stress evident at lower economic tiers.
- Consumer confidence measures have been at recessionary levels lately, despite a low unemployment rate and the booming stock market.
- The University of Michigan's consumer sentiment survey shows a stark divide in sentiment between households that have large stock holdings and those that don't.
What they're saying: "Our results imply that AI-linked stock gains do add meaningfully to consumption, but that they still probably only account for a minority of its increase over time," wrote Abiel Reinhart and Michael Feroli.
- "Of course, a reversal in AI enthusiasm could drive a wider downturn, which would depress spending more significantly," they added.
