The luxury market, after three years of dampened sales, is seeing a resurgence fueled by a new wave of wealth from artificial intelligence companies and their impending initial public offerings. This "AI wealth effect" is drawing parallels to the cryptocurrency boom of 2021, which also saw gains channeled into high-end goods. According to Charles Tian, CEO of WatchCharts, the secondary market for watches has recovered significantly over the past year due to this new influx of money. Subdial, a London-based secondary watch platform, has noted an increase in younger buyers from the AI and tech sectors over the last six to twelve months, a shift from their traditional finance industry clientele.
This newfound wealth is expected to extend beyond watches, boosting sales for luxury cars, art, and particularly jewelry, which is good news for companies like Cie Financiere Richemont SA, owner of Cartier and Van Cleef & Arpels. Flavio Cereda, who manages GAM Holdings AG's luxury-brands fund, estimates that IPOs from companies like SpaceX, Anthropic, OpenAI, and Databricks could generate approximately $4 billion in additional U.S. luxury sales next year, adding about one percentage point to projections for global luxury goods sales growth in 2027. High-net-worth and very high-net-worth individuals are projected to account for about 60% of luxury spending, with brands like Brunello Cucinelli SpA, LVMH Moet Hennessey Louis Vuitton SE's Loro Piana, and Hermes International SCA benefiting from this spending.
The U.S. luxury market has already seen strong performance, driven by the S&P 500's record climb, with Richemont reporting a 27% increase in sales from the Americas in the three months to June 30, excluding currency movements. South Korea is also a bright spot, with the Kospi Index doubling over the past year and chip workers at Samsung Electronics Co. set to receive average bonuses of $340,000. In Japan, young investors benefiting from the Nikkei 225 Index's rise are splurging on Cartier jewelry and Saint Laurent clothing. However, risks remain, including potential stock market corrections, a spread of the recent chipmaker sell-off, and the danger of luxury brands becoming exclusively associated with the ultra-wealthy, potentially alienating middle-class customers.
