CNBC's "Closing Bell" team markets with Liz Thomas of SoFi, Brian Belski of Humilis Investment Strategies and Sonali Basak of iCapital.

New York

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

Rise of AI

A panel of investment experts, including Liz Thomas, Brian Belsky of Humulus Investment Strategies, and Shonali Basak of iCapital, discussed the current state of the market and the evolving narrative around artificial intelligence (AI) stocks. They noted that while the S&P 500 is down 6% from its highs, indicators suggest the market is closer to the end of its pullback, with small caps and several sectors showing signs of recovery.

The panelists highlighted that concerns over spending, debt, and high valuations persist, with a Bank of America survey indicating over half of fund managers believe AI stocks are in a bubble. They emphasized the importance of stock selection, especially in technology, and advised caution with large AI-focused companies due to rising debt levels. The consensus was that the pullback is not yet over, but signs point to a nearing bottom.

AI narrative starting to change, but story not over: iCapital's Basak

Let's welcome our panel. So far is Liz Thomas. Brian Belsky, he's the founder, CEO, and CIO at Humulus Investment Strategies. iCapital's Shonali Basak. Everybody here at Post9, how we like it. It's good to have everybody. Liz, are we closer to the end now of whatever this pullback is? I mean, it's not really a correction. We're 6% off the highs for the S&P. What do you think? I think we're closer to the end. Now, some of the stuff that I think has already found the end, look at things like small cap actually got to some oversold conditions and now have bounced back. They're the major index today that's green. You mentioned this already. Nine out of 11 sectors are green today. So we've had a pretty good wash of some of that excess. And it's important to wash out this excess throughout a very strong bull market. I've mentioned this before. We're going to have these intermittent breakdowns in beta. And frankly, I think some of these are what's keeping us from getting so overly exuberant and unhinged. So they're healthy to see. They're tough to sit through, but they're healthy to see. And I do think we're getting toward the end. That doesn't mean that I think it's done today. Right. But I do think we're closer to the end. Well, it could be. I don't know. I mean, it's you know, Jim Labenthal made the case on Halftime that this is a sentiment driven pullback. It's not like something terrible happened somewhere. And now the market is having these ripple effects through it. People are concerned about too much spend, too much debt, too high valuations and such. I mean, if you look at the Bank of America fund manager survey today, it tells a story. More than 50 percent of fund manager survey investors continue to think AI stocks are in a bubble. That says it all. Yeah. I heard you push him today on that. And that was really, really a great exchange back and forth. But I think you've got to take two steps back and look at stocks on an individual basis, but also look at stocks in the S&P 500, but especially technology where you're seeing free cash flow levels at what they are, where debt to equity is at near all time low. So it's on a stock by stock basis. And so I do think that this, again, just begs and people hate when I say this, but it's really, really begs to be more of a stock picker versus buying a technology ETF or anything like that, because we're very clearly seeing stock differentiation. Look at today. And so that's in how bottoms are made. You're starting to see that actually occur. What also is very, very healthy and Liz nailed it on what's happening with the market is that you're seeing people come in and buying these areas that are providing opportunities, whether that's health care, the banks and the fundamental prowess of the airlines are also being rewarded today in terms of their stock strength. You know, JP Morgan's vice chair, Dan Pinto, warning of a possible correction in valuations. You have the downgrade of Microsoft and Amazon today at Roth Child, where their commentary, I think, speaks to where the concerns are, Sonali. It's a time to take a more cautious stance on the hyperscalers and move beyond the industry's reassuring trust us. We think there's going to be bifurcation at this point. You're looking at the narrative starting to change in AI, and we don't believe that the whole story is over just because you have a few days of negative headlines of what came into this year as a mega trend going into the next few years. We do think that you have to still be more selective at this juncture, given just how much debt we've seen come into this space in a short amount of time. You know, you look at every metric actually at this point. You look at even the weighted average maturities of how long these companies are holding debt and have to roll them. So I don't think it's over. I would agree with Liz completely. We used the same words this morning. We felt that it was closer to the end than the beginning when you looked at the sell-off that we're looking at.

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San Francisco

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Johannesburg

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Jerusalem

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Warsaw

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Paris

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AI narrative starting to change, but story not over: iCapital's Basak

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Rise of AI