(Bloomberg) — As artificial intelligence rolls out around the globe, will it drive inflation or deflation? The answer is both — one and then the other, according to JPMorgan Chase & Co.’s new global co-heads of sales and research.
Most Read from Bloomberg
This year, investors betting on AI’s initial impact are piling into commodities, anticipating that the infrastructure needed for the technology will bolster demand for energy and equipment, Claudia Jury and Scott Hamilton said in their first interview since taking over. Such wagers are helping buoy prices, despite the Federal Reserve’s campaign to rein them in, the managers said. The Bloomberg Commodity Spot Index advanced almost 8% this year through Tuesday.
“The build-up is inflationary,” Jury said, “because of the infrastructure and everything you’re going to need to rely on in the future in terms of power, CPU, grids — things like that.”
Later it will be deflationary as companies use AI to become more efficient. “To me this is a multi-year play,” she said.
The technology — and how to bet on it — is top of mind for clients of Wall Street’s biggest trading shop as more than 650 of them flock to Paris this week for the firm’s largest-ever Global Markets Conference. Interest rates, private credit and geopolitics are also up for discussion, Jury and Hamilton said.
JPMorgan’s own contingent includes Chief Executive Officer Jamie Dimon, President Daniel Pinto, commercial and investment-bank co-heads Jenn Piepszak and Troy Rohrbaugh, and other senior leaders. Many are new to their roles after a series of leadership moves earlier this year.
Investors have been reassessing the Fed’s rate trajectory as indicators suggest cuts will come slowly. Dimon underscored his own uncertainty about that outlook last month, writing in his annual shareholder letter that JPMorgan is prepared for rates to be 2% to 8%, or even higher.
For investors, “the main focus at the moment is on the Fed,” Hamilton said. But “the bigger positions are less so in rates at the moment, more so in commodities and equities.”
New Rivals
The increasing role of non-banks in business lines previously dominated by investment banks is also front of mind. Building out private credit is one of JPMorgan’s strategic priorities, Jury said. “There’s clearly a lot of AUM going there,” she said, referring to assets under management.
On another front, non-banks such as Citadel Securities LLC and Jane Street are challenging incumbents’ bond-trading franchises. Citadel Securities, for example, started making markets in investment grade corporate bonds last year, and the number of institutional clients using its fixed-income services has already jumped more than 15%.
Some bank executives have sounded alarms over such shifts, blaming regulation and urging industry watchdogs to intervene before risks build up off their radar. Dimon said last year that non-bank rivals were “dancing in the streets” over proposed capital rules at the time.
Still, JPMorgan has high-frequency trading offerings of its own and wields a $4.1 trillion balance sheet that enables it to serve clients through downturns. Stiffer competition also creates opportunities, Hamilton said.
“Some other banks have fallen by the wayside,” he said. “That’s created some wallet for everybody to go after.”
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
