Investors are 'overconfident' about the impact of A.I., strategist says

cnbc.com:

Market participants are «overconfident» about their ability to predict the long-term effects of AI, according to Mike Coop, chief investment officer at Morningstar Investment Management.

Despite a pullback so far this month, optimism about the potential of AI to drive future profits has powered the tech-heavy Nasdaq composite to add more than 38% year-to-date, while the S&P 500 is up by more than 16%.

Some analysts have suggested that a bubble effect may be forming, given the concentration of market gains in a small number of big tech shares. Nvidia stock closed Thursday's trade up 190% so far this year, while Facebook parent Meta Platforms has risen more than 154% and Tesla 99%.

«If you look back at what's happened over the last year, you can see how we've got to that stage. We had the release of ChatGPT in November, we've had announcements about heavy investment in AI from the companies, we've had Nvidia with a knockout result in May,» Coop told CNBC's «Squawk Box Europe» on Friday.

«And we've had a dawning awareness of how things have sped up in terms of generative AI. That has captured the imagination of the public and we've seen this incredible surge.»

In a recent research note, Morningstar drew parallels between the concentration of huge valuations and the dotcom bubble of 1999, though Coop said the differentiating feature of the current rally is that the companies at its center are «established giants with major competitive advantages.»

«All of our company research suggests that the companies that have done well this year have a form of a moat, and are profitable and have sustainable competitive advantages, compared with what was happening in 1999 where you had lots of speculative companies, so there is some