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A global labor shortage of about 80 million workers will send tech stocks parabolic, according to Fundstrat’s Tom Lee.
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Lee argued Wednesday that the tech sector will eventually make up 50% of the S&P 500.
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“I think AI will really address the global labor shortage of roughly 80 million workers by the end of 2030,” Lee said.
A global labor shortage of about 80 million workers by the end of 2030 will lift tech stocks, according to Fundstrat’s Tom Lee.
Lee said in a video Wednesday that he expects the technology sector to grow to 50% of the S&P 500, up from its current weight in the benchmark index of about 30%.
Lee made the comments after Nvidia delivered a blockbuster first-quarter earnings report, sending the stock soaring 10% to record highs. However, according to Lee, the AI story is still in its infancy as it will help boost productivity and address a looming labor shortage.
“The prime-age workforce is growing more slowly than the entire world population, and by the end of the decade that gap will be about 80 million workers. So unless there is productivity growth, which AI will do, this will put a lot of pressure. on companies or incentives for them to innovate. And that means you’re going to see a shift from annual payroll spending to silicon spending,” Lee said.
Lee estimates that companies will spend approximately $3.2 trillion annually on AI technology to address the growing labor shortage.
Nvidia, which is approaching annual revenue of about $100 billion, will benefit greatly from that spending, Lee said.
This isn’t the first time a global labor shortage has led to a parabolic rise in tech stocks, as tech companies have helped boost productivity.
“Between 1948 and 1967, there was a global labor shortage and technology stocks went parabolic. And between 1991 and 1999, there was a global labor shortage and technology stocks went parabolic, so this is what’s happening today,” Lee said.
And as for whether Nvidia is in a bubble similar to the dot-com bubble when Cisco’s stock soared to record highs on the promise of the Internet, Lee put things in perspective.
“Keep in mind that Nvidia is selling a $100,000 chip because it’s in short supply, no one else is really selling it. Cisco, on the other hand, sold a $100 router during the dot-com boom, and yet they achieved a price/earnings of 100x. I think Nvidia’s 30x price-to-earnings seems quite attractive and that’s why we think it’s still early days,” Lee said.
Read the original article on Business Insider
