The global labor shortage, estimated to reach 80 million workers by 2030, is expected to significantly boost technology stocks, according to Tom Lee, the head of research at Fundstrat Global Advisors.
What Happened: Lee predicts that the technology sector's share of the S&P 500 will increase from its current 30% to 50%, reported Business Insider. This projection is based on the potential for artificial intelligence to enhance productivity and address the impending labor shortage.
Lee's comments come in the wake of NVIDIA Corp's (NASDAQ:NVDA) remarkable first-quarter earnings report, which led to a 10% surge in the company's stock. He believes that the AI narrative is still in its early stages and will drive a shift from traditional wage spending to increased investment in AI technology.
"The prime age workforce is growing slower than the total world population and by the end of the decade that gap is around 80 million workers. So unless there is a productivity boom which is what AI will do, it's going to create a lot of pressure on companies or incentives for them to innovate. And that means you're going to see a shift from annual wage spend to silicon spend," Lee said.
Lee estimates that companies will collectively spend around $3.2 trillion annually on AI technology to counter the growing labor shortage. He also highlighted that Nvidia, with its approaching $100 billion in annual revenue, is poised to benefit significantly from this increased spending.
The potential for a labor shortage to drive a surge in technology stocks is not a new phenomenon, Lee pointed out. He referenced previous instances of global labor shortages, such as those between 1948 and 1967 and between 1991 and 1999, which led to significant increases in technology stocks.
Why It Matters: The global labor shortage is a significant issue that is not limited to the tech industry. In April 2023, U.S. tech giants faced challenges in downsizing their European workforce due to strict labor laws. This issue is likely to have a far-reaching impact on various industries and could potentially drive significant changes in the global economy.
Despite the potential for a surge in technology stocks, some experts have warned that the market may not have hit rock bottom yet. In April, both Jim Cramer and Lee cautioned against buying the dip, suggesting that the market may still have further to fall.
However, the AI-driven rally has continued to gain momentum, with Nvidia's stock topping over $1,000 on Thursday as the stock market reclaimed record highs. This ongoing rally suggests that the potential for AI to drive a surge in technology stocks is a significant factor to consider in the current market landscape.
Image Via Pixabay
This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote