What About The Non-Superstar Companies That Account For 85% Of US Jobs

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Dhaval Joshi of BCA Research discusses the disparity between the stellar performance of S&P 500 ‘superstars’ and the wider corporate America, emphasizing the importance of non-superstar companies that account for 85% of US jobs. While the US stock market shows a significant valuation premium based on the potential of generative AI, the adaptation by Web 2.0 companies to this new technology is uncertain. The analysis suggests a structural shift in the economy, underscoring the potential risks in overvaluing the US stock market relative to non-US markets, particularly Europe.

Main Points

Performance Discrepancy

The stark performance contrast between the S&P 500 ‘superstars’ and the vast majority of US companies emphasizes a discrepancy in economic indicators.

Structural Issues in the Economy

The declining share of proprietors’ income and the underperformance of non-superstar companies provide a deeper insight into the structural issues within the US economy.

Challenges in Technological Adaptation

The challenge for Web 2.0 companies in transitioning and profiting from generative AI highlights the potential shift in technological dominance.

Insights

The US stock market's pricing reflects expectations for generative AI's impact similar to the Web 2.0 era, which may be overly optimistic.

The US stock market’s record 50 percent valuation premium versus the non-US stock market is pricing generative AI to do through the next decade what the Web 2.0 network effect did through the last decade.

Non-superstar companies, crucial for the US job market, are seeing softening profits.

For the direction of the US jobs market, we should closely monitor the profits of the 6.4 million non-superstar US companies that account for 85 percent of US jobs. These profits have been softening.

Web 2.0 companies might struggle to adapt to and monetize generative AI.

But it will be very difficult for the Web 2.0 superstar companies to become generative AI superstar companies, all assuming there are indeed any lasting generative AI superstar companies.

URL

https://www.zerohedge.com/markets/what-about-non-superstar-economy