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What this video’s about:

In this edition of “The Market Share,” Paul Gifford, Chief Investment Officer at 1st Source Bank, and Pete Cahill, Senior Portfolio Manager, discuss the role of artificial intelligence (AI) in investing and its impact on the stock market. This is the third episode of our 2025 Investment Outlook series: episode one focuses on markets, valuations, and investor sentiment and episode 2 discusses The Fed and fixed income investment strategy.

Understanding AI and Its Growing Presence

Paul and Pete start by explaining AI and its growing importance in our daily lives. And beyond our day-to-day usage, AI has become a huge topic in investing. AI’s rise is due to three main things: lots of data, fast computing, and better semiconductor technology. These help AI do complex tasks, like predicting the next word in a sentence, which is the basis of generative AI like ChatGPT or Microsoft Copliot.

Everyday Applications of AI

Pete talks about how AI is already part of our daily lives. AI helps with writing emails, assisting songwriters, and powering digital assistants like Siri and Alexa. There are also specialized uses.  For example, AI helps doctors analyze X-rays. AI also helps in software development and cybersecurity, making code writing and fraud detection easier than ever.  In short, AI is everywhere.

AI’s Impact on Investing and the Stock Market

The discussion then moves to AI’s impact on investing and the stock market. Pete talks about whether AI is just a trend or a major change going forward. And if it’s here to stay, then the companies that will be the big winners might not be who you expect.  He compares it to the gold rush, where businesses who sold picks and shovels were profitable even if their customers didn’t strike it big. In this analogy, companies that provide AI infrastructure– like Nvidia– might come out on top regardless of how AI service providers do.

Pete also highlights how AI affects all companies’ profit margins. He notes that profit margins for S&P 500 companies have been going up, even reaching all-time highs. This suggests that businesses are using AI to analyze and streamline their operations, becoming more efficient and profitable.  He’ll be closely watching how this affects the market as a whole, as well as individual economic sectors.

Conclusion

AI is definitely changing the world of stock market and investing. AI adoption will continue to grow, changing the way businesses perform and the investment strategies you’ll want to use. Keep a close eye and stay informed to effectively manage the opportunities and challenges of AI in investing.

This article is the third in a three-part series on our 2025 investment outlook. Be sure to check out the previous parts for more insights and strategies.

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