Global labor shortages are estimated to reach 80 million by 2030, which is likely to give tech stocks a big boost, according to Tom Lee, head of research at Fundstrat Global Advisors.
What happened: According to Business Insider, Li predicts that the technology sector's share of the S&P 500 will increase to 50% from the current 30%. The prediction is based on the potential of artificial intelligence to boost productivity and address looming labor shortages.
Li's comments came following NVIDIA Corp's (NASDAQ:NVDA) impressive first-quarter earnings report, which sent the company's shares up 10%. Li believes the AI ​​story is still in its early stages and that there will be a shift from traditional wage expenditures to increased investment in AI technology.
“The prime-age workforce is growing more slowly than the overall global population, and in 10 years' time the gap will be around 80 million people. Without an AI-driven productivity surge, there will be huge pressure on companies and incentives to innovate. This means we will start to see a shift from annual wage spending to silicon spending,” Lee said.
Lee estimated that companies will collectively spend about $3.2 trillion a year on AI technology to combat the growing labor shortage, and stressed that Nvidia, with annual revenue approaching $100 billion, stands to benefit greatly from this increased spending.
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The possibility that a labor shortage could cause a tech stock boom is not a new phenomenon, Lee noted, pointing to previous examples of global labor shortages that led to big tech stock rallies, including from 1948 to 1967 and from 1991 to 1999.
Why it matters: The global labor shortage is a significant issue that is not unique to the technology industry. In April 2023, a major U.S. technology company faced challenges reducing its European workforce due to stringent labor laws. This issue could have far-reaching effects across various industries and could lead to major changes in the global economy.
While tech stocks could surge, some experts warn the market may not have hit bottom yet. In April, both Jim Cramer and Lee warned against buying on the dip because the market could still fall further.
But the AI-driven stock rally continues to gain momentum, with Nvidia shares surpassing $1,000 on Thursday as the stock market reclaimed all-time highs. This continued rally suggests that the potential for AI to drive a surge in tech stocks is an important factor to consider in the current market environment.
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Image courtesy of Pixabay
This story was produced with Benzinga Neuro and edited by Kaustubh Bagalkote.
