As the S&P 500 reaches new highs, AI will create investment opportunities.

  • The S&P 500 closed at a record high on Tuesday.
  • While some investors may fear a pullback, experts say it would be wise to keep an eye on companies that are at the forefront of adopting artificial intelligence.

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People walk outside the New York Stock Exchange on July 25, 2022 in New York City.

Spencer Platt | Getty Images

The S&P 500 hit another record high on Tuesday.

The index, which tracks the performance of about 500 of the largest U.S. company stocks, has jumped 53 percent since inflation peaked in 2022, experts noted Wednesday during the CNBC Financial Advisor Summit.

While this may raise fears that a pullback is on the horizon, the stock may have more room to run.

“I've been feeling pretty good about equities since the financial crisis,” said Swetha Subramaniam, head of U.S. equity strategy and quantitative strategy at Bank of America.

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Today, companies have adapted to the high inflation environment while workers are seeing positive wage growth, Subramaniam said. America is admittedly flawed, including wealth distribution, income inequality and protectionism.

“But I don't necessarily think these are negative for the market,” Subramaniam said. “I think that's really very positive for the S&P 500.”

Tim Seymour, founder and chief investment officer of Seymour Asset Management, said the strong run-up could also prompt financial advisers to be apprehensive about allocating fresh capital.

According to Courtney Garcia, a certified financial planner and senior wealth advisor at Payne Capital Management, many investors are tempted to stay in cash because “they feel comfortable there.”

But while a guaranteed return of up to 5% on cash may feel great, it doesn't necessarily keep pace with inflation, Garcia said. She said it's a precaution she tells clients.

Investors may still find new opportunities to invest in stocks, experts said during a session at the summit.

Subramaniam said that in 10 years or less, S&P 500 index companies will likely become more efficient and labor-light, due to the impact of generative artificial intelligence.

“Generative AI is a game changer,” said Subramaniam. “And what it can do for industries is profound.”

Call centers have already been impacted by AI, he said, and other sectors such as financial services, legal services and Hollywood still stand to benefit.

In the 1980s and 1990s, a similar productivity and efficiency story unfolded with the personal computer revolution, which promoted greater automation across industries.

According to Subramaniam, some companies will be ready to figure out how to properly use generative AI tools first, which will lead to increasing their margins and increasing their overall multiplier.

“What you want to do is figure out which management teams will harness the power and strength of these many new tools and do it first and do it well,” Subramaniam said.

Seymour said the “Magnificent Seven” companies — Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and MetaPlatforms — will dominate in terms of growth.

But opportunities in healthcare, industries, energy and utilities are cheap. He said that international exposure should not be neglected.

Subramaniam noted that each of the Magnificent Seven companies has different drivers, benefits and risks. That's how investors should think about the entire S&P 500, he said.

“Where we are today is a real stock picker's market,” Subramaniam said.

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