I watch many economic trends and business issues evolve as a financial professional. The rapid rise of artificial intelligence (AI) during the past year has been remarkable, and it has spotlighted the fast-paced decision-making in the US tech industry.
At the same time, it has cast some concerns that Europe–and other parts of the world–are lagging in AI innovation and adoption.
As you can see in the accompanying chart, AI is just the latest in a series of events in the past 20 years that shows how quickly US companies move when it comes to winning patents for digital technologies. The chart shows the US compared to Europe, but it’s a similar pattern with the rest of the world.1
What’s next, particularly for this transatlantic divergence? Some speculate that the European Central Bank or the Bank of England may cut short-term interest rates more often in the coming months to help jump-start economies. The Federal Reserve, on the other hand, may need some flexibility.1
Remember, about 40% of Standard & Poor’s 500 company revenues are generated outside of the US, so the vitality of the European and other economies is essential to watch. Broad support is needed to help the “E” part of the price-to-earnings ratio.2
Sources:
1. FT.com, May 12, 2024. “Can Europe’s economy ever hope to rival the US again?” Forecasts and forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize.
2. GlobalXetfs.com, October 2, 2022. “Sector Views: S&P 59 Sensitivity to Global Factors.”