The rising popularity of artificial intelligence (AI) stocks seem to be obscuring a recession warning being given by a cyclical sector-based indicator developed by investor Stan Druckenmiller. The stock market is relying heavily on the success of AI, which is compensating for a decline in cyclical sectors. Housing, automotive, and retail sectors are currently contributing to the downturn indicated by Druckenmiller’s indicator, which has previously preceded a recession. Despite this, the AI sector continues to thrive, powered by a surge of heightened interest. Semiconductor firms, in particular, are being affected by the US’s regulation of technology and knowledge related to semiconductors being exported to China. Late last year, OpenAI created Chat GPT 3.5, causing a Sputnik moment and inciting a race to catch up with competitors. The creation also resulted in an acceleration of the AI sector, while cyclical stocks remained in decline. These indicators, as presented by the Recession Gauge, suggest a recession may already be in progress.
The Druckenmiller Indicator is named after Stan Druckenmiller, who is a successful investor with decades of experience in the financial industry. He became famous for his legendary profits when he worked at Quantum Fund and Duquesne Capital.
OpenAI is an AI research lab with a mission to create and promote AI in a manner that is safe and beneficial to humanity. GPT 3.5 is OpenAI’s language processing model and one of the most advanced AI platforms available.
