Why Soaring AI Stocks May Falter

Skepticism about long-term performance rises as the payoff of artificial intelligence now seems far off.


Artificial intelligence may not be the economic booster rocket that optimists fancy it to be, according to an analysis by BCA Research. The “bubble in anything AI-related is the greater risk, irrespective of whether it catalyzes, or coincides with, a U.S. or global recession,” wrote Dhaval Joshi, the firm’s chief strategist.

While AI stocks have had an enormous runup, skeptics are starting to wonder how long the streak can last. Reason: The payoff seems distant. In another commentary, BCA wrote that “the euphoria on how quickly the AI gold rush will yield its gold, and to whom, risks being popped.”

AI has been very beneficial to investors in recent years, adding an estimated $16 trillion in value to the S&P 500 since late 2022, per BCA (the index’s current value if $45.8 trillion). The largest exchange-traded fund tracking AI, the Global X Artificial Intelligence & Tech ETF, has advanced 17% annually over the past five years, beating the S&P 500 (15%), and is up 13% this year, although it now is  trailing the S&P 500 (18%) in 2024.

Nvidia, which specializes in producing chips for AI, has soared 92% yearly over the five-year period, and  still is roaring, with a 140% rise this year.

The economic bounty that AI could create has been the subject of widespread optimism. JPMorganChase CEO Jamie Dimon contended in his annual investor letter that AI will be as economically transformative as electricity or the steam engine. Michael Arone, chief investment strategist at State Street Global Advisors, made a similar argument in a commentary, writing that AI’s “impact on productivity could add trillions of dollars in value to the global economy.” 

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One complication for AI stocks is that, for a long time, many investors borrowed cheaply in Japan to buy them, but lately, the appeal of the “yen carry trade” has dipped, softening demand, as the Japanese central bank has started to hike interest rates.

By BCA’s reckoning, the popularity of AI stocks is independent from whatever happens to the global economy. A collapse of AI equities, its analysis declared, is “the bigger risk over the next 12 years.”

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Kentucky Pension System Returns 10.7% in Fiscal 2024

The KPPA’s assets rose $3 billion to $26.9 billion.



The Kentucky Public Pensions Authority, the organization that manages several public pension funds in the state,
announced that the system’s pension assets returned 10.7% in fiscal 2024, which ended June 30.  

Assets of the pension system, comprised of the County Employees Retirement System, Kentucky Employees Retirement System and the State Police Retirement System, each with a pension fund and an insurance trust fund, rose to $26.9 billion from $23.9 billion through June 2023.  CERS and KERS both have separate hazardous and nonhazardous membership. 

The CERS hazardous and nonhazardous pension and insurance funds returned 11.7% in the fiscal year, while the Kentucky Retirement System, comprised of both KERS and SPRS, returned 10.6%.  

Each fund outperformed its actuarial assumed rate of return, which was 6.5% for CERS, KERS and SPRS insurance trust, 6.25% for the KERS hazardous portfolio and 5.25% for both the KERS nonhazardous and SPRS fund. 

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 “Our disciplined investment strategy and focus on diversification continue to produce strong risk adjusted performance for the systems and participants,” said Steve Willer, CIO of the KPPA, in a statement. 

The KPPA manages pensions for 433,000 beneficiaries, comprised of active and retired educators, state and local government employees, state police officers and other nonteaching staff of local school boards and universities.  

As of the end of July, the KERS nonhazardous pension plan had $4.3 billion in assets under management, while the KERS hazardous and SPRS plans had $1.04 billion and $665 million in assets, respectively. These funds had insurance plan assets of $1.711 billion, $676 million and $275 million, respectively. 

The CERS nonhazardous pension plan had $9.79 billion in assets as of the end of July, and the hazardous plan had $3.468 billion in assets. The two systems’ insurance plans had assets of $3.631 billion and $1.748 billion, respectively. In total, CERS manages $18.3 billion, as of June 30.  

At the end of July, CERS had allocated 50.8% of its portfolio to global equities, 19.7% to specialty credit, 12.1% to core fixed income, 6.4% to private equity, 5.2% to real estate, 4.1% to real return assets and 1.8% to cash. 

KERS had a 31.8% allocation to equities and a 27.2% allocation to core fixed income. The fund also allocated 19.4% to specialty credit, 8.5% to real return assets, 5.1% to real estate, 4.6% to private equity and 3.4% to cash.  

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KPPA Appoints Ryan Barrow as Executive Director 

Kentucky Public Pensions Authority Names Steve Willer CIO 

KPPA Releases Fiscal Year 2023 Annual Report 

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