David Chao, Global Market Strategist APAC at Invesco, says exposure to AI is the largest potential market gainer but also the largest market risk. He states that China's AI sector still has room to grow, as valuations there are more palatable.

The release of Open AI's ChatGPT has accelerated the development of artificial intelligence and warnings about its impact on society.

Rise of AI

Invesco analysts describe artificial intelligence as the largest opportunity and risk in current global markets, citing the sector's concentration in a handful of major companies. They note that while U.S. strategies focus on advanced chips and algorithms, China is prioritizing practical AI applications, particularly in robotics and manufacturing.

The report suggests that Chinese tech companies may see faster productivity gains and commercialization of AI, as evidenced by the popularity of Chinese AI apps even among U.S. consumers. Invesco also highlights the potential for small and mid-cap U.S. stocks to benefit if the domestic economy accelerates, but warns of the risks associated with heavy market concentration in AI.

AI is both the largest market opportunity and risk: Invesco

So you know we've been talking a lot about TSMC and the whole AI trade. You've probably had a chance to look at some of the numbers or at least the market reaction. And one takeaway for some people is look it seems to put to rest these worries about oh no the bubble is going to pop etc. They say I think has legs it looks like. Well it certainly does after the great quarter that we saw from Taiwan Semi. And I will say that looking on for the past for the next year investors will really be balancing kind of the AI trade versus things like are we entering into a recovery part of the economic cycle driven by things like Fed cuts. So I think that these are the two things that we will be watching out for this year. Does it concern you. And how are you thinking about this that there's still so much concentration right. So much of the market waiting is you know literally a half a dozen plus one names. Right. And at the same time it's gotten to the point where the economy and growth in the United States so much of it almost half of it depends on what happens in AI. That's right. I think that AI is not only the potential opportunity for market gains for this year it's also the biggest risk to markets as well. Given the over concentrations that we're seeing. So how do you edge. I think that we like if I still has legs I think for Asian tech companies especially Chinese tech companies where valuations are a lot more palatable and not the U.S. economy is likely to reaccelerate later on this year brought by things like Fed cuts. And I think that things like small cap mid cap stocks are likely to do better in the U.S. Interesting. So I want to pick up on something you just brought out. You're a little bit more optimistic about AI and in China. And that probably fits in this whole narrative that look if we're looking for commercialization monetization of all the billions of dollars that companies have invested. China is probably a better place to look at least in the near term. Right. Because they're thinking about nothing about you know trying to change our fundamental understanding of physics. Right. They're just trying to get to more practical solutions which help companies do what they do better or even consumers consume more. That's right. I think the big question right now for AI is are we going to get the productivity gains that that AI is promising. And the U.S. strategy for AI is go hard to go home. They want to have the fastest the smallest semiconductor chips. They want to have the best algorithms. But the Chinese strategy on AI is very different. They are focused on the applicability of the AI whether combining AI with humanoid robots or with advanced manufacturing. So I make an argument that AI will see productivity gains much much sooner in places like China. OK. So that's in China itself where you know we've been talking about how it'd be fairly easy I think to lay around and put on an AI layer to what is already the largest installed basis robotics in the world. But you know the other leg to this and I don't know if it's already starting to happen. I think it is right. Is this whole the distinction between AI and China being open and closed ironically in the U.S. But when you take a look at what's happening in Silicon Valley the apps that folks out there are preferring to use almost half of them are using Chinese apps simply because look it's a lot more cost effective. That's right. The most popular or well used app in the U.S. on A.I. is actually the Alibaba app. And so I think that's very telling. And I think it's just the strategy again of Chinese companies being able to utilize A.I. through open source A.I. and so you have a lot more applications. Chinese households and consumers on their mobile apps use more A.I. related apps than their American counterparts. So I think that we're going to see the commercialization and also the productivity gains flow more quickly in places like China.

The U.S. and Taiwan clinched a trade deal that cuts tariffs on many of the semiconductor powerhouse's exports, directs new investments in the U.S. technology industry and risks infuriating China.

Washington

U.S., Taiwan strike deal on tech tariffs risking China's ire

The United Nations Security Council has held an emergency meeting to discuss the deadly anti-establishment protests in Iran at the request of the United States. President Donald Trump has refused to rule out military action on Iran over the killing of protesters. Tehran has vowed to retaliate if that happens.

Tehran

Iran, U.S. clash at UN over protests as calls grow for restraint

Venezuelan opposition leader María Corina Machado said she presented President Trump with her real Nobel Peace Prize medallion during her visit to the White House on Thursday.

Machado gives Trump her Nobel Prize medallion at White House meeting

Tensions are soaring in Minneapolis as protesters face off against federal agents. As Matt Gutman reports, it comes after a Venezuelan migrant was shot by an ICE agent after allegedly trying to flee federal officers.

Minneapolis

Tensions flare in Minneapolis after second shooting by ICE agent

Ali Shaath, the Palestinian former government official chosen to administer Gaza under a U.S.-backed deal, has an ambitious plan that includes pushing war debris into the Mediterranean Sea and rebuilding destroyed infrastructure within three years.

Tel Aviv-Yafo

U.S. backs Palestinian civil engineer to administer Gaza

The U.S. has announced the launch of the second phase of President
Donald Trump's peace plan in the Gaza Strip, which will involve moving from a ceasefire to demilitarization.

Jerusalem

Middle East Conflict

Gaza deal's second phase to begin

CBS News met with fighters from an armed and outlawed Iranian opposition group in the mountains of northern Iraq who said the protests in Iran have given them hope. They believe the regime can be toppled "if the people who are demonstrating on the street get international help."

Iranian opposition group says protests give hope to topple regime

Ukrainian President Volodymyr Zelensky said Wednesday a "state of emergency" will be declared in the energy sector, after relentless Russian strikes on heat and electricity supplies during freezing winter temperatures.

Kyiv

Ukraine Invasion

Ukraine: Zelensky declares energy emergency after Russian strikes

Military personnel from several NATO countries including Germany, France, Sweden and Norway headed to Greenland on Thursday as Denmark and its allies prepared ⁠for exercises to try to assure US President Donald Trump over its security as he pushes to acquire the island.

Nuuk

Several European countries and NATO allies send troops to Greenland

Elon Musk's artificial intelligence company xAI said late on Wednesday it imposed restrictions on all users of its Grok AI chatbot that limit image editing after the service produced sexualized images that sparked concerns among global regulators.

California

Musk's xAI curbs Grok image editing after concerns

Protests in the U.S. city of Minneapolis as another person's been shot by an immigration officer.

Protest erupts in Minneapolis after ICE agent shoots man during raid

The United States has completed its first sale of Venezuelan oil, generating around $500 million, a US official said Wednesday, the first major energy transaction since Washington’s dramatic intervention in Venezuela earlier this month.

Venezuela Strikes

United States completes first sale of Venezuelan oil

Denmark says fundamental disagreements remain with the US over the future of Greenland. President Donald Trump has said he wants to take over the territory 'one way or another', arguing anything short of full American control is unacceptable.

Greenland, Denmark say Trump set on ‘conquering’ territory after meet

Republicans in the Senate killed a resolution on Wednesday that would have put limits on President Trump's ability to take action in Venezuela. Vice President JD Vance had to step in to break the 50-50 tie.

Senate Republicans kill war powers effort to limit Trump on Venezuela

U.S. Vice President JD Vance and Secretary of State Marco Rubio hosted foreign ministers from Greenland and Denmark as President Donald Trump continues to insist on a U.S. takeover of Greenland.

Vance and Rubio meet with officials from Greenland and Denmark

At least 30 people were killed when a construction crane collapsed onto a moving train in northeastern Thailand, at the site of a planned high-speed rail project intended to eventually link China with much of Southeast Asia.

Sikhio District

At least 30 people killed in Thailand train derailment

Tehran has warned neighbors hosting U.S. troops that it would hit American bases if Washington strikes, a senior Iranian official told Reuters, as Iran seeks to deter Donald Trump's threats to intervene on behalf of protesters.

Iran warns neighbors it could hit U.S. bases if Washington strikes

As Prime Minister Mark Carney heads to China to ease trade tensions, President Donald Trump reiterated that the U.S. doesn’t need Canadian goods or the CUSMA. Carney was also urged by Ontario’s premier to not back down on tariffs for Chinese EVs.

Ottawa

Trump says he doesn’t need Canadian goods or the CUSMA

United States President Donald Trump says he has cancelled all meetings with Iranian officials and has told protesters to “take over your institutions” amid Tehran’s crackdown.

Trump cancels Iran meetings, urges protesters to take on institutions

Around 2,000 people including security personnel have been killed in protests in Iran, an Iranian official said, the first time authorities have acknowledged the high death toll from an intense crackdown on two weeks of nationwide unrest.

Iran official says 2,000 killed in nationwide unrest

Former President Bill Clinton is refusing to appear before the House Oversight Committee to testify as part of its investigation into Jeffrey Epstein. CBS News congressional correspondent Nikole Killion has more.

Bill Clinton skips Epstein deposition on Capitol Hill

Former Corsican nationalist leader Alain Orsoni, who also served as the president of soccer club AC Ajaccio, was shot dead in Corsica on January 11 during his mother’s funeral. He was 71. Alain Orsoni was one of the leaders of the Corsican National Liberation Front (FLNC) in the 1980s. He later founded and led the Movement for Self-Determination (MPA).

Vero

Ex-Corsican nationalist leader Alain Orsoni killed at mother's funeral

Far-right leader Marine Le Pen, who needs to have a graft conviction overturned to seize her best chance at the French presidency, risks seeing her life's work upended if she loses her appeal. It comes after a French court last year barred her from running for office for five years over a European Parliament fake-jobs scam involving her and other officials from her National Rally party.

Paris

Marine Le Pen's appeal in EU fund embezzlement case opens in Paris

British regulators are investigating X for lewd AI images generated by Grok, the AI arm of Elon Musk's social platform. Michael Goodyear, an associate professor at New York Law School, joins CBS News with more.

London

UK investigating Musk's X over Grok's AI-generated images

As U.S. President Donald Trump weighs a response to Iran's deadly crackdown on nationwide protests, Iranian leaders say they are still keeping communications open with the Americans. But on January 12, large pro-government rallies took place across Iran, and the U.S. was clearly framed as the enemy and instigator of the protests.

Iranian leaders mobilise supporters as U.S. weighs intervention

Last week an Immigration and Customs Enforcement Agent shot and killed Renee Good, a Minneapolis mother who was observing a law enforcement action carried out by the agency.

Minnesota

Minnesota sues federal government to prevent further ICE deployment

The demonstrations are the biggest Iran has seen in years. Protests spurred by the Iranian currency collapse have morphed into a larger test of Supreme Leader Ayatollah Ali Khamenei's rule.

Trump weighs military action against Iran over protest crackdown

President Claudia Sheinbaum has sought to safeguard Mexican sovereignty while cooperating with the US on key issues.

Mexico City

Mexico’s Sheinbaum rejects Trump’s threat of strikes on drug cartels

President Donald Trump said that any country which does business with Iran will face a tariff rate of 25% on trade with the U.S., as Washington weighs a response to the situation in Iran which is seeing its biggest anti-government protests in years.

Trump says nations trading with Iran will face 25% U.S. tariffs

Iran’s Foreign Minister Abbas Araghchi says his country is ready for war but also for dialogue, after US President Donald Trump said the US is considering ‘very strong options’ in response to Iran’s crackdown on antigovernment protests.

AI is both the largest market opportunity and risk: Invesco

Breakdown

See The Full Story

Rise of AI