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(NEW YORK) — Inflation data to be released on Tuesday will reveal the latest price movements, a key economic signal for central bankers weighing interest rate cuts and voters turning their attention to the general election.

Price increases have cooled dramatically from a peak of about 9%, but inflation still stands more than a percentage point higher than the Federal Reserve’s target rate of 2%.

The latest release from the U.S. Bureau of Labor Statistics is expected to show that consumer prices increased 3.1% over the year ending in February. That finding would leave the annual inflation rate unchanged from the prior month.

Core inflation — a closely watched measure that strips out volatile food and energy prices — is expected to have increased 3.7% over the year ending in February, which would mark a slight cooldown from the previous month.

After progressing steadily lower for much of last year, the inflation rate has stalled in recent months.

The bout of stubborn prices has arrived as the Federal Reserve weighs interest rate cuts. Such a move would start to reverse a near-historic series of rate hikes that dates back to March 2022, when the Fed sought to rein in excessive price increases.

Addressing House members at the Capitol last week, Fed Chair Jerome Powell reaffirmed the Fed’s plans to cut rates this year but cautioned that the central bank first wants to see inflation fall lower.

“The economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured,” Powell told lawmakers.

Interest rate cuts would lower borrowing costs for consumers and businesses, potentially triggering a burst of economic activity through greater household spending and company investment.

But the Fed risks a rebound of inflation if it cuts interest rates too quickly, since stronger consumer demand could lead to an acceleration of price increases.

At its most recent meeting, in January, the policymaking body at the Fed opted to leave rates unchanged. The fed funds rate remains between 5.25% and 5.5%, the highest interest rate since 2021.

Still, the economy has largely defied expectations of a slowdown imposed by elevated borrowing costs.

U.S. job gains far exceeded expectations in February, U.S. Bureau of Labor Statistics data on Friday showed.

The U.S. added 275,000 jobs in February, surpassing predictions of about 200,000 jobs added, but marking a substantial decline from the hiring of roughly 350,000 workers in January, according to Bureau of Labor Statistics data.

The S&P 500 — the index that most people’s 401(k)’s track — reached a record high last week.

Attitudes about the economy have improved in recent months. Consumer sentiment inched lower in February but preserved much of the large gains achieved in previous months, a University of Michigan survey found.

Even so, some areas of the economy have cooled.

Consumer spending, which accounts for roughly two-thirds of U.S. economic activity, fell sharply in January.

Meanwhile, the housing market has slowed substantially due in large part to soaring mortgage rates.

The average interest rate for a 30-year fixed mortgage has soared to 6.88%, rebounding after a steady decline at the end of last year, according to a report from Freddie Mac on Thursday.

Looking back further, that figure has skyrocketed from an average 30-year fixed mortgage rate of 3.76% prior to when the Fed began raising interest rates in March 2022, data shows.

Taken together, economic performance has not shaken the Fed’s steadfast pursuit of lowering inflation down to its goal of 2%, Powell told federal lawmakers last week.

“We remain committed,” Powell said.

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(NEW YORK) — Sam Altman will remain as CEO of OpenAI and rejoin its board of directors following an “extensive” external investigation into his temporary ouster last year, the company’s board announced on Friday.

The OpenAI Board said it has “full confidence” in the continued leadership of Altman and co-founder Greg Brockman following a monthslong review by the law firm WilmerHale.

The board ousted Altman from OpenAI, the maker of the popular conversation bot ChatGPT, in November. Altman’s unexplained exit thrust the company into disarray and sparked an employee revolt, with Brockman quitting in response.

Nearly all 800 employees at OpenAI signed a letter calling for the resignation of the company’s board and the return of Altman as CEO.

Microsoft announced it had hired Altman and Brockman to lead a new artificial intelligence department. Then four days after his removal, Altman was reinstated as CEO of OpenAI. Brockman also returned to the company.

As part of its review of the events surrounding Altman’s removal, WilmerHale conducted dozens of interviews with members of OpenAI’s prior Board, OpenAI executives, advisors to the prior Board, and “other pertinent witnesses,” as well as reviewed more than 30,000 documents, the board said.

WilmerHale found there was a “breakdown in trust” between the prior board and Altman that led to him stepping down in November, but that his removal wasn’t warranted, the board said.

“WilmerHale found that the prior Board believed at the time that its actions would mitigate internal management challenges and did not anticipate that its actions would destabilize the Company,” the board said. “WilmerHale found the prior Board implemented its decision on an abridged timeframe, without advance notice to key stakeholders, and without a full inquiry or an opportunity for Mr. Altman to address the prior Board’s concerns.”

Following the review, OpenAI Board chair Bret Taylor said they have “unanimously concluded” that Altman and Brockman “are the right leaders for OpenAI.”

Among other developments announced by the board on Friday, three new members have been elected to the board: Dr. Sue Desmond-Hellmann, former CEO of the Bill and Melinda Gates Foundation; Nicole Seligman, former executive vice president and global general counsel of Sony and former president of Sony Entertainment; and Fidji Simo, CEO and chair of Instacart.

OpenAI is also creating a whistleblower hotline “to serve as an anonymous reporting resource for all OpenAI employees and contractors,” the board said.

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(WASHINGTON) — President Joe Biden declared triumph on bread-and-butter issues in his State of the Union address, describing the U.S. economy as “the strongest in the world.”

Still, he said, conditions must improve for middle-class Americans, pointing for instance to high costs in the housing market that remains resistant to a cooldown elsewhere in the economy.

Biden proposed a pair of tax credits for current and prospective homeowners meant to ease affordability and stimulate the housing market.

“If inflation keeps coming down, mortgage rates will come down as well,” Biden said. “But I’m not waiting.”

Biden proposed a $5,000 tax credit for first-time homebuyers to put toward their mortgage, which he said amounts to an estimated $400 per month.

In addition, the White House has put forward a $10,000 tax credit for families who sell their starter homes. In theory, the measure will facilitate activity in the housing market, since many homebuyers have clung to their current low-rate mortgages rather than take on a new home at much higher rates.

The average interest rate for a 30-year fixed mortgage has soared to 6.88%, rebounding after a steady decline at the end of last year, according to a report from Freddie Mac on Thursday.

Looking back further, that figure has skyrocketed from an average 30-year fixed mortgage rate of 3.76% prior to when the Fed began raising interest rates in March 2022, data shows.

In response to ABC News’ request for comment, a White House official said the administration believes the tax credits can make a substantial difference for homebuyers when coupled with a proposal that would increase the supply of homes.

Economists who spoke to ABC News cheered the effort to thaw the frozen housing market but warned that the tax incentives may not be enough for homebuyers to overcome the cost of high home prices and mortgage rates.

“I’m very bullish on this first-time homebuyers credit because this will help partially offset the higher interest rates that we’re facing,” Bruce Sacerdote, an economics professor at Dartmouth University, told ABC News.

“The more home ownership, the better,” Sacerdote added. “It ends up being a great investment for families.”

Steve Allen, an economist at North Carolina State University’s Poole College of Management, agreed. “Here’s an eternal truth in economics about taxes: Tax more of it, you get less of it. And tax less of it, you get more of it,” Allen said.

Some economists cautioned, however, that the tax credit for first-time homebuyers may not be large enough to alter the approach of those who stand to receive the benefit.

“I’m worried that this could be too small to make a real difference,” Andrew Levin, an economics professor at Dartmouth College and a former Fed economist, told ABC News.

Julia Fonseca, a finance professor at the University of Illinois at Urbana-Champaign, voiced similar concern in a post on X about the potential insufficiency of the $10,000 tax credit for families selling their starter homes.

If the families choose to pursue the tax credit and sell their homes, Fonseca said, they will likely encounter major challenges finding a new home, because the sluggish market has made so few homeowners willing to sell.

Plus, since mortgages have risen sharply, homeowners will need greater incentive to trade in the relatively low mortgage rates on their current homes for higher rates on a new one, Fonseca said.

The average borrower would need to receive roughly $50,000 to make up for the disparity in mortgage payments, she added.

“The maximum tax credit of $10k is small relative to this amount, so it might not be enough to incentivize even one seller to sell, let alone two,” Fonseca said.

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(WASHINGTON) — Enthusiasm about the U.S. economy has soared in recent months but polls indicate most consumers still bemoan inflation. More than 60% of adults say recent price increases have caused financial hardship for their family, a Gallup poll in January found.

Prices, in turn, have taken on outsized importance on the brink of a presidential election that may hinge on bread-and-butter concerns.

In recent months, the White House has announced a raft of measures aimed at lowering onerous fees faced by consumers when they miss a credit card payment, overdraft a bank account or book a hotel room.

The initiatives tackle costs borne by a large swathe of Americans, delivering potential savings while signaling the Biden administration’s desire to protect consumers from corporate practices that it deems predatory, some experts told ABC News.

However, they added, the message may not register with most Americans, since the hidden fees often remain out of sight, leaving them less influential than expenses like gas and grocery prices.

The Consumer Financial Protection Bureau finalized a rule on Tuesday that will cut the typical credit card late fee to $8 from $32, saving U.S. consumers an estimated $10 billion per year. Late credit card payments have reached their highest level since 2011, the Federal Deposit Insurance Corporation found in a report released on Thursday.

The White House policy came roughly two months after the CFPB introduced a rule that would slash the fee charged by banks when customers overdraft an account.

Since last year, the White House has undertaken a separate campaign to reduce “junk fees,” such as hidden costs added toward the end of a purchase involving concert or airline tickets.

“Fighting hidden junk fees is part of the President’s broader agenda to lower costs for Americans. The President thinks about these issues from the perspective of families sitting around the kitchen table working through their bills and balancing their budgets every month. While these fees might not mean much for the wealthy, they add up for middle-class families,” Jon Donenberg, deputy director at the National Economic Council, a Biden administration group that advises the president, told ABC News.

The Biden campaign did not respond to ABC News’ request for comment.

Teresa Murray, consumer watchdog at nonprofit advocacy U.S. PIRG Education Fund, praised the measures as a much-needed assault on unfair costs, especially when price increases burden many households.

“It’s important to have transparency and fairness no matter how good or how bad the economy is – no matter how high inflation is,” Murray told ABC News. “But at a time when a lot of folks are dealing with inflation and high food prices, then every dollar does count.”

The rules may not only lower costs for some Americans but also send a message that the Biden administration understands the challenges posed by high costs and aims to address them, Jon Krosnick, a professor of political science at Stanford University who studies how prices affect perceptions of the economy, told ABC News.

The goodwill toward Biden could extend well beyond those directly impacted, Krosnick said, since decades of research show that voters approach economic news through a wide lens that considers the implications for society at large.

“People ask ‘Is this good for the country as a whole?’ rather than ‘Is this good for me personally?'” Krosnick said.

However, many voters may not become aware of the initiatives in the first place because the measures lower hidden fees that consumers often lose sight of anyway, some experts said.

“Perceived price changes in very salient cases — such as groceries and other everyday goods — are a very crucial determinant of household beliefs about the economy,” Francesco D’Acunto, a Georgetown University finance professor who studies how people understand economic news, told ABC News.

The Biden administration, by contrast, is “targeting potentially important costs households face but ones that are less salient. So it would probably be less effective,” D’Acunto added.

Utpal Dholakia, a marketing professor at Rice University, echoed the point, noting that many of the fees occur less frequently than common household expenses.

“Most of us don’t stay in hotels 20 nights a month — most of us stay occasionally,” Dholakia said. “It’s not something that most people are concerned about on a day-to-day basis.”

For those who do hear about the initiatives, Dholakia added, the response may be determined by partisan affiliation instead of financial relief.

“To the extent that you’re politically engaged and a Democrat, you’ll obviously look at these actions in a positive light,” Dholakia said. “If you’re a Republican or independent, your reaction will be more muted.”

Polling data shows broad support across both major parties for the efforts to address fees, a White House official said. A survey in December from Data for Progress, a left-leaning polling firm, found that a Biden proposal to address junk fees was backed by 81% of Democrats and 77% of Republicans.

The U.S. economy performs well on just about every measure of economic health. Inflation is falling, job growth is surging, and gross domestic product is proving much more resilient than expected in the aftermath of near-historic interest rate hikes.

Attitudes about the economy have improved in recent months, data shows. Consumer sentiment inched lower in February but preserved much of the large gains achieved in previous months. The index, however, remains well below pre-pandemic levels, a University of Michigan survey found.

Despite making up a small share of consumers’ overall expenses, the fees tackled by Biden could draw more attention than some might expect, Amit Bhattacharjee, a marketing professor at the University of Colorado, told ABC News.

“These fees aren’t necessarily a significant component of prices but they feel annoying,” Bhattacharjee said.

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(SAN FRANCISCO) — A Chinese national was arrested Wednesday in California and charged with allegedly stealing confidential trade secrets from Google’s Artificial Intelligence program while secretly working for two AI startup companies based in China, according to a newly unsealed indictment.

Linwei Ding, a 38-year-old resident of Newark, joined Google as a software engineer in 2019 and was tasked with developing the software used by the tech giant in their supercomputing data centers, according to court records.

But prosecutors say three years into the job, he allegedly began secretly stealing confidential trade secrets — including “the building blocks” of the company’s data centers that were used for training AI models to understand language and generate responses to queries, court records show.

Over a roughly year-long span, Ding is alleged to have uploaded more than 500 files with confidential information, all while prosecutors allege he was secretly starting to work for two China-based AI tech startups — including one he founded himself.

Ding allegedly traveled to China on two separate instances — October 2022 and November 2023 — to participate in business meetings and even attend a conference where he pitched his company to prospective investors, according to court records.

According to one document obtained by prosecutors, Ding advertised his company’s services by specifically citing his experience with Google’s supercomputer platform.

“We just need to replicate and upgrade it — and then further develop a computational power platform suited to China’s national conditions,” the document said, court records show.

Ding is also alleged to have taken specific steps to avoid being caught by Google, including copying secret files into his Google Cloud by first copying them into his Apple Notes application and then converting them to PDFs, according to court documents.

In December 2023, Google was alerted to him uploading some files and he was confronted by an internal investigator, court documents show. Ding allegedly told the investigator he uploaded it as evidence of the work he was doing but that he had no intention of leaving the company.

That same week, Ding allegedly had a fellow employee scan his Google access badge at the building three separate times to make it appear as if he was there, prosecutors claim, and soon after booked a one-way ticket to Beijing. He then emailed his resignation to his manager, according to court records, and the company soon after learned of his presentation at the investor conference. The FBI was alerted and secured warrants to search Ding’s house and Google Cloud account.

Ding was taken into custody Wednesday morning and faces four federal counts of theft of trade secrets. If convicted, he could face up to 10 years in prison for each count. He did not have an attorney listed on his court docket as of Wednesday afternoon.

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(NEW YORK) — Target has announced a paid membership program set to begin next month, launching a subscription service similar to those on offer at competitors Amazon and Walmart.

The membership program, called Target Circle 360, will cost $99 per year, unless new customers sign up at a discounted rate of $49 available until May 18, the company said in a statement Tuesday.

Subscribers will receive free same-day delivery in as little as one hour for goods available through its in-house delivery service, as well as discounted prices and 30 extra days to return products.

For hundreds of thousands of items unavailable through the in-house delivery service, subscribers will enjoy free two-day shipping.

“We’ve prioritized building strong relationships with guests since Target’s inception, and our reimagining of Target Circle continues that commitment,” Cara Sylvester, Target’s executive vice president and chief guest experience officer, said in the company’s statement.

Target’s branded credit and debit cards will afford subscribers an additional 5% discount on any shopping trip for those enrolled in the membership program.

Since 2019, Target has offered a free subscription service called Target Circle, which has served more than 100 million customers, the company said. The new membership program will preserve a free option while adding the paid service.

The fresh offering from Target debuts at a lower price than an Amazon Prime membership, which costs customers $139 per year but includes additional benefits such as access to the e-commerce giant’s streaming service, Prime Video.

The membership program at Walmart costs customers $98 per year, affording them special discounts, same-day delivery, gas price discounts at partner locations and other perks.

Sylvester told analysts Tuesday about the importance of the subscription program for the company’s bottom line.

Last year, members of the company’s free membership program visited Target five times more often and spent five times more than guests who weren’t members, Sylvester said.

The new paid subscription service places additional emphasis on the company’s shift toward e-commerce, which was accelerated by the COVID-19 pandemic.

“For those who want the magic of Target delivered to their door in as little as one hour, there’s Target Circle 360,” Sylvester said.

Target invested $100 million last year in a plan to improve its e-commerce business with an expanded delivery network. By 2026, the company will add at least 15 additional warehouses known as sortation centers, Target said in February 2023.

Speaking during an earnings call Tuesday, Target CEO Brian Cornell touted measures taken by the company to enhance its e-commerce service, especially same-day delivery.

“Continued innovation and better integration with our target ecosystem means we’re ready to expand same-day delivery for our guests while also building on our next-day capabilities,” Cornell said.

Target sales declined 4.4% over the three months ending in January compared to the same period last year, an earnings report on Tuesday showed. The slide in sales was less severe than analysts expected.

Digital sales dropped 0.7% in the three-month period compared to the same quarter last year, which marked an improvement from the 6% decline in the previous quarter.

Shares of Target climbed 2.5% in early trading on Wednesday.

The paid membership program makes up a key part of the company’s plan to reverse the decline and return to growth, Cornell said Tuesday.

“This road map will help us meet consumers where they are,” Cornell said.

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(LAS VEGAS) — Las Vegas is testing the future of airport screening with self-security checks and ABC News’ Good Morning America got a firsthand look at how it works.

ABC News transportation correspondent Gio Benitez went to Harry Reid International Airport to try what could be the future of air travel with the Transportation Security Administration (TSA).

Passengers enter the self-service screening lane, which has multiple sensors, and are met with a virtual call with an agent.

“Is there anything I need to know about my shoes or the bag?” Benitez asked the TSA agent.

“Yeah. So since you are pre-check, you may keep shoes on, but make sure you grab one of the trays that are located next to you,” the agent instructed.

As travelers put the bags through a scanner, they will walk through an all glass scanner, which is slightly different than the standard ones seen in most airports.

“The scanner has all this glass here. So we’re going to get in here. Oh and it shows you that you have to stand differently,” Benitez said while getting into the scanner. “Once the machine clears me, I get my bag and I’m on my way.”

Benitez said, “It’s really very minimal contact with just about anybody.”

One additional convenience for any forgetful travelers, if an item like a wallet or phone are left behind in a security bin, the system stops the tray and alerts the passenger so they can grab their belongings.

While it may take some getting used to and could slow folks down at first, Christina Peach, the branch manager for the TSA innovation task force, is ready to see what works and what doesn’t.

“I’m hoping for a lot of feedback — even the negative feedback because you’re always going to get a little bit of both,” she told ABC News.

While some may wonder if this is a way to cut down on TSA officers, Peach reassured, “we will always have officers.”
She added that TSA agents “are the most important part of any of our systems, but we will be reallocating them to busier aspects of the screening process.”

TSA officer Ken Nixt told ABC News that while the new screening is more hands off, he’s still there and ready to help in person, explaining, “we’re just making sure that we’re following through all the security measures that are needed to ensure a safe travels.”

This is currently just a test in Las Vegas and is not yet launching at other airports.

Those traveling through Harry Reid International Airport can use the new lane and help as TSA develops the possible future of airport security.

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(NEW YORK) — Tax season, for many, conjures kitchen-table drudgery spent revisiting pay stubs and financial choices. For some, though, a reward awaits: a tax refund.

The possibility and scale of a refund can hinge on the approach taken by a tax filer, financial advisors told ABC News.

Tax credits, retirement account contributions and deductibles are among the avenues that determine whether taxpayers receive money back from the U.S. government, they said.

Here’s what to know about how to get a bigger tax refund, according to experts:

Choose the deduction that’s right for you

Tax season presents filers with a choice about how to pursue deductions.

Every taxpayer enjoys the opportunity to avail themselves of the standard deduction, which reduces a filer’s taxable income by a set amount. This year, the standard deduction for a single filer amounts to $14,600; while married filers can deduct $29,200.

On the other hand, filers can opt to itemize their deductions if the combined amount exceeds that available to them under the standard deduction. Charitable donations, gambling losses and mortgage interest are among the expenses available for itemized deductions, the Internal Revenue Service website says.

The standard deduction expanded under the tax overhaul enacted by Trump in 2017, making that option the preferable one for most filers, Dan White, an author and founder of the financial advisory firm Daniel A. White & Associates, told ABC News.

“We see very few people itemize anymore,” White said.

However, White added, taxpayers who opt for itemized deductions should plan to take on all eligible expenses in the same calendar year, thereby maximizing the total deduction.

“If you want to go that route, look at bunching all of your deductions in a single year,” White said.

Take advantage of tax credits

A laser-eyed focus on tax deductions risks overlooking another source of savings: tax credits.

“Everyone typically thinks of itemizing their deductions to increase the return, but many people forget to check tax credits, which can make a big difference,” Gregory King, a certified public accountant and tax specialist with financial advisory firm Empower, told ABC News.

For instance, filers can again take advantage of an electric vehicle tax credit put into effect by the Inflation Reduction Act.

Individuals can obtain an EV tax credit of up to $7,500 if they purchase an eligible vehicle and earn less than $150,000. Since the credit is nonrefundable, a filer cannot gain more from the credit than they owe in taxes.

Another tax credit enacted by the IRA, which allows homeowners to upgrade their residence’s energy efficiency, has expanded this year. Earners who take advantage of the tax credit can receive a refund equivalent to 30% of the cost of renovations.

The child tax credit, meanwhile, affords up to $2,000 per child for filers with dependents under 17.

Some taxpayers may also benefit from a potential expansion of the child tax credit. Earlier this month, the House passed a bill that would increase the child tax credit to as much as $3,600 for some filers, raising it significantly from its current level of $2,000.

At least for now, the measure hovers in legislative limbo, awaiting a vote in the Senate. If the credit ultimately goes into effect, IRS officials will automatically apply it to qualifying earners.

“The child tax credit is a big one,” James Cox, a financial advisor and managing partner of Virginia-based Harris Financial Group, told ABC News. “That can create thousands of dollars for a family.”

Contribute to a retirement account

Another surefire way to achieve tax savings is a contribution to a retirement account — and it’s not too late to start.

Contributions are tax deductible for a range of accounts such as 401(k)’s and traditional IRA’s.

Through the end of the tax filing period, on April 15, such contributions will count toward deductions from the prior year’s taxes.

“You can make a contribution, keep all money in your own IRA account and reduce your taxes,” Cox said. “It’s kind of a double benefit.”

Make a donation

Tax-deductible donations offer a common and accessible route for shaving your tax bill, if you have excess income to share, experts said.

It’s too late, however, to make donations that would alter a tax refund this time around.

“You can’t make donations now and count them toward a prior year’s taxes,” Cox said. “That won’t work.”

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(MENLO PARK, Ca.) — A Meta spokesperson acknowledged reports of outages on Tuesday for Facebook, Instagram and Threads, preventing some U.S. users from logging on to the sites, Meta told ABC News in a statement.

“We’re aware people are having trouble accessing our services. We are working on this now,” Meta spokesperson Andy Stone said in a statement.

More than 300,000 reports of an outage at Facebook were received on Tuesday morning by DownDetector, a site that tracks problem reports from users. DownDetector also tallied nearly 50,000 reports of an outage at Instagram.

An array of commerce tools on the platforms are experiencing major disruptions, including Ads Manager and Meta Business Suite, according to Meta’s website.

“We are aware of an issue users are having logging into our platforms,” the site says. “Our engineering teams are aware and are actively looking to resolve the issue as quickly as possible.”

This is a developing story. Please check back for updates.

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(NEW YORK) — Ten days after the Super Bowl, Wall Street held its own version — at least that’s the way some traders on social media described it.

Nvidia, which had soared to prominence selling the majority of chips behind the artificial intelligence boom, was set to release buzzy quarterly earnings that could move markets.

The company didn’t disappoint, shattering expectations with a 265% surge in revenue compared to a year earlier.

The following day, the S&P 500 jumped 2.5%; while the tech-heavy Nasdaq rose nearly 3%.

“That was strictly because of Nvidia’s good earnings. It demonstrated the power of AI,” Steve Sosnick, chief strategist at trading firm Interactive Brokers, told ABC News.

“But I was wondering: What if we flipped it on its head and Nvidia failed to deliver?” Sosnick added. “If you live by a narrow group of stocks and that group is really dragging the market higher, it increases the level of risk.”

The stock market has climbed since the outset of last year, driven in large part by a group of major tech companies propelled by enthusiasm over AI. Bulls said the trend exemplifies typical concentration at the beginning of a technological revolution, as a few firms with outsized resources develop and popularize AI.

Critics, however, warn that profit-making uses of AI remain a far-off vision, risking a market downturn if the technology falls short of the watershed that boosters have promised. Many people with 401(k)s and college funds dependent on the S&P 500 could end up burned, some analysts told ABC News.

“AI has gone into hyperdrive,” Sosnick said. “Everyday people buy into the S&P 500 because they think it’s a diverse set of stocks. With the concentration right now, that’s an underappreciated risk.”

Major stock indexes drew a bump in recent months from investors optimistic about benefits of the newly prominent technology.

However, those gains were concentrated primarily in a handful of tech giants, known as the so-called “Magnificent 7”: Alphabet, Amazon, Apple, Meta, Microsoft, Tesla and Nvidia.

Since the S&P 500 is weighted based on company value, larger firms make up a bigger share of the index. 

“The AI revolution has been the fuel in the engine for the tech bull market and the broader markets,” Dan Ives, a managing director of equity research at investment firm Wedbush, told ABC News.

Microsoft, the most valuable company in the world, saw its shares soar nearly 75% since the beginning of last year.

That stretch began with an announcement, in January 2023, that Microsoft was investing $10 billion in OpenAI, the artificial intelligence firm that developed ChatGPT. Months later, Microsoft’s Bing became the default search engine for ChatGPT.

Apple, the world’s second largest company, is working on plans to incorporate generative AI into all of its devices, Bloomberg reported in October. Earlier this month, Nvidia became the third-largest company on the planet.

Analysts bullish on the market acknowledge the concentration at the top but expect the AI-driven gains to broaden as the technology pervades the economy and smaller companies gain notoriety.

“Chatbots are just the tip of the iceberg,” Mike Loukas, CEO of TrueMark Investments, which specializes in exchange-traded funds, or ETFs. “The AI revolution is real and it’s here to stay.”

TrueMark Investments offers an ETF that allows investors to buy shares pegged to a basket of roughly two-dozen AI-related firms, spanning from Nvidia to a host of lesser-known names. The ETF has surged 52% over the past year.

“To me, the early stages are always reflective of people buying what they can see and touch and understand,” Loukas added. “Right now, that’s the big companies in the news that are blowing the doors off of earnings. It will broaden out.”

The flood of investment in AI has elicited corporate spending on the technology, which will thrust the technology into the wider market and boost further gains, said Ives.

“We’re going to see the ripple effect from this massive spending wave,” Ives said.

Skeptics abound, however. They point to what they consider a lack of evidence that AI will be of use to firms beyond a narrow set of tech juggernauts. Without wider adoption, they say, the market explosion could fizzle.

A study released last month by a group of researchers at major universities and federal agencies found fewer than 6% of firms used AI-related technologies, though a majority of very large firms reported at least some AI use.

Kristina McElheran, a business professor at the University Toronto and a co-author of the study, said observers face difficulty accurately assessing private sector use of AI, since there is not a single agreed-upon definition of the technology and some companies keep their efforts secret.

However, market euphoria about AI risks outpacing what appears to be modest adoption so far, McElheran added.

“What I am worried about is that the rate and level of excitement and investment is exceeding the rate and level of actual absorption and adoption inside firms,” McElheran said. “That disconnect is troublesome.”

Sosnick, of Interactive Brokers, said an AI boom would require adoption from companies big and small that lack an immediate connection to the technology.

“If you’re just a regular company, it’s not clear how AI is benefiting you yet,” Sosnick said. “Is this helping Pepsi do their work more efficiently? Hard to say.”

Nvidia, Sosnick added, is “essentially selling the picks and shovels to the gold miners.”

“Ultimately though the real success or failure of AI will be whether it flows down to the bottom line of other companies,” he said. “So far it’s not clear that that’s the case.”

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