AI isn't just a tech story - it's a long-term theme that will see investments across industries, Bank of America's Savita Subramanian says

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AI isn't just a tech story - it's a long-term theme that will see investments across industries, Bank of America's Savita Subramanian says
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  • AI theme is strong, "long-tailed" and not just a tech story, according to Bank of America's head of US equity and quantitative strategy.
  • Companies across industries are going to have to spend on AI "just to stay alive", Savita Subramanian told CNBC.
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The frenzied rally in some artificial intelligence-related stocks this year hasn't been rational, but the underlying AI theme itself is strong, for the long-run, and not just a tech story, according to Bank of America's head of US equity and quantitative strategy.

Companies across industries are going to have to invest in AI just to stay competent - and that makes it a broader theme than just a tech story, Savita Subramanian told CNBC on Tuesday.

"AI is complicated but it's not just a tech story, which is what's exciting about it. It's the idea that companies that have been clunky and haven't really fixed themselves in a long time, have the opportunity to get leaner and lighter," she said.

"Companies are going to have to spend on AI just to stay alive. Tech companies are going to spend on AI, old economy companies are going to spend on AI, everybody is. So it's not just a one-theme market," she added. "AI is just part of this whole efficiency, automation, 'doing more with less' theme that I think is going to be really bullish for corporate margins."

The benchmark S&P 500 share index climbed 14% so far in 2023 while the tech-heavy Nasdaq 100 surged 37%, despite many experts warning of an impending recession.

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The market has been boosted by investor excitement over the rise of AI technologies, and expectations that the Federal Reserve will soon end its aggressive interest-rate hikes.

"There are parts of the S&P 500 that look incredibly attractive and the thing that's obscured by mega caps is if you take out the 50 biggest stocks the PE of the S&P 500 x 50 is 15 times trailing earnings which is actually relatively low," Subramanian said.

"There are value opportunities but they're right now being obscured by this sort of AI bubble," she added.

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