LIVE MARKETS-AI can be a golden ticket on the ride to higher earnings growth

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AI CAN BE A GOLDEN TICKET ON THE RIDE TO HIGHER EARNINGS GROWTH

We are now around one-third of the way through Q4 earnings season, and while Jack Ablin, founding partner and chief investment strategist at Cresset, says profit results matter, he also believes management commentary offers more valuable insights into future trends, particularly regarding labor markets, hiring patterns, artificial intelligence (AI) adoption, and immigration policy impacts.

Now that the Bureau of Labor Statistics has postponed the January jobs report, Ablin has some thoughts on AI and the labor market.

"Companies successfully implementing AI will enjoy margin expansion without concomitant revenue growth, representing a powerful earnings catalyst. Meanwhile, labor-intensive businesses face competitive pressure from AI-enabled rivals operating with leaner structures," writes Ablin in a note.

He adds that the widening skills gap creates opportunities in education technology and workforce retraining, and therefore, companies offering AI tools for small and medium businesses should see sustained demand as competitive pressures force broader adoption.

Importantly, Ablin says AI’s labor market impact remains concentrated in specific sectors and roles, while manufacturing, construction, healthcare provision, and skilled trades have shown minimal direct disruption.

Looking forward, Ablin's bottom line is that corporate America "faces diametric challenges," and in his view, "companies leveraging AI will ride a productivity wave to higher earnings growth."

The industries he thinks are positioned to benefit include banking and financial services, retail and consumer goods, technology and telecommunications, as well as life sciences.

Meanwhile, he believes labor-intensive businesses that require low-skilled and foreign-born workers could come under margin pressure. These industries include agriculture, construction, food processing, leisure and hospitality, and certain sectors of healthcare.

(Terence Gabriel)

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