"Is the era of AI driving stock markets coming to an end?"
A warning has emerged that the "AI earnings rally" that led global stock markets is reaching a turning point. However, with analysis also suggesting that AI investment itself is not slowing, investors' attention is shifting from "earnings" to companies' next strategies.
"Earnings Are Strong, but Further Gains May Be Difficult"
According to Bloomberg TV on the 11th, Christian Mueller-Glissmann, head of portfolio strategy and asset allocation research at Goldman Sachs, said, "It appears that the large-scale earnings surprises driven by AI have entered their final stage."
He forecast that while companies are likely to post results exceeding market expectations again in this second-quarter (April-June) earnings season, investors' expectations have already risen so significantly that a simple "earnings surprise" alone will be difficult to translate into further stock gains.
Goldman Sachs currently analyzes the second-quarter earnings growth rate (consensus) for S&P 500 companies this year at 22% compared with the same period last year.
Behind this analysis is a divergence between earnings and stock price trends. Micron, an AI memory beneficiary, has seen its recent steep rise lose momentum, and Nvidia has also fallen about 16% from its all-time high, bringing its price-to-earnings ratio (PER) based on projected earnings over the next 12 months down to 18 times, the lowest level since 2019.
Mueller-Glissmann said, "This is a process of leveraged investment flows, which had excessively concentrated in the semiconductor sector, reversing," and predicted that in future earnings seasons, companies' guidance and management's future investment plans, rather than earnings themselves, would become the key market variables.
Goldman Says It Is Not an AI Bubble: "The Real Beneficiaries Are Elsewhere"
However, Goldman Sachs drew a line against claims that the AI investment cycle itself has ended.
Earlier, in an interview with Business Insider on the 1st, Ben Snider, senior U.S. equity strategist at Goldman Sachs, rebutted the "AI bubble theory" held by some in the market and assessed that AI investment flows remain solid.
Some voice concerns that hyperscalers such as Microsoft, Amazon, Meta, and Alphabet could slow the pace of data center investment if they fail to confirm profitability against their AI investments. But strategist Snider viewed it as highly likely that expanded investment to build AI infrastructure would continue.
Citing the fact that the S&P 500's forward PER has actually declined even though the index has risen more than 20% over the past year, he explained that "the recent rise is not a simple bubble but a result backed by growth in corporate earnings." He added, "A situation where skepticism remains in the market is actually healthier than when everyone is shouting optimism."
Goldman Sachs named AI infrastructure, power infrastructure, and hyperscalers as the AI investment fields to watch going forward. It expected that semiconductor, server, and network equipment companies would be direct beneficiaries of expanded AI investment, and presented power infrastructure as a key beneficiary field, forecasting that data center power demand would increase 50% by 2027 and up to 165% by 2030.
It also analyzed that hyperscaler companies such as Microsoft, Amazon, Meta, Alphabet, Oracle, and IBM, while relatively neglected this year compared with semiconductor firms, are trading at the lower end of their PER range over the past 10 years and could present new investment opportunities.
