A global labor shortage will send tech stocks soaring, with the sector poised to grow to 50% of the total stock market, Fundstrat says
"I think AI is really addressing a global labor shortage of roughly 80 million workers by the end of 2030," Fundstrat's Tom Lee said.
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- A global labor shortage of about 80 million workers will make tech stocks go parabolic, according to Fundstrat's Tom Lee.
- Lee argued on Wednesday that the technology sector will eventually make up 50% of the S&P 500.
- "I think AI is really addressing a 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 is going to send technology stocks soaring, according to Fundstrat's Tom Lee.
Lee said in a video on Wednesday that he expects the technology sector will grow to 50% of the S&P 500 from its current weight in the benchmark index of around 30%.
Lee made the comments after Nvidia posed a blockbuster first-quarter earnings report, which sent the stock soaring 10% to record highs. However, according to Lee, it's still early days for the AI story because it will help boost productivity and tackle a looming labor shortage problem.
"The prime age workforce is growing slower than the total world population and by the end of the decade that gap is around 80 million workers. So unless there is a productivity boom which is what AI will do, it's going to create a lot of pressure on companies or incentives for them to innovate. And that means you're going to see a shift from annual wage spend to silicon spend," Lee said.
Lee estimates that companies will spend roughly $3.2 trillion per year on AI tech to address the growing labor shortage.
Nvidia, which is approaching about $100 billion in annual revenue, stands to benefit from that spending in a big way, Lee said.
This isn't the first time a global labor shortage has led to a parabolic move higher in technology stocks as tech companies helped boost productivity.
Fundstrat
"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 to whether Nvidia is in a bubble similar to the dot-com bubble, when shares of Cisco soared to record highs on the promise of the internet, Lee put things into perspective.
"Keep in mind Nvidia sells a $100,000 chip since it's scarce, no one else really sells it. By contrast Cisco sold a $100 router during the internet boom, and yet they got to a 100x P/E. I think Nvidia's 30x P/E seems pretty attractive and that's why we think it's early days," Lee said.
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