24 August 2023
The last few days have seen both Nvidia, the US chip manufacturer, release earnings up by 429% over the past year and the German manufacturing ‘Purchasing Managers’ Index (PMI) well into contractionary territory.
The chart below shows the divergence between global equity performance and the performance of the German economy, highlighting the ongoing boom in the world of bits versus an evolving recession in the world of atoms.
Excitement around the prospects for AI is driving tech stocks and investment in computing capacity higher at the same time as higher energy costs, higher interest rates, and a slowing Chinese economy continue to depress the real-world manufacturing economy.
This raises the question of how long this divergence can last. Can tech companies continue to grow at a rapid pace if the global economy falls into recession?
On the other hand, if the current investment in computing power and AI breakthroughs delivers their promised productivity gains, will these benefits flow through to manufacturing and commodities?
Our Market Snippets aim to provide concise insight into our investment research process. Each week, we highlight one chart that showcases our research, motivates our current positioning, or simply presents something interesting we’ve discovered in global financial markets.
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