US Stock AI Narrative Enters the Second Half: From Broad Rally to "Reef" Obstacles

Investors are increasingly realizing that the artificial intelligence (AI) sector not only offers investment opportunities but also carries significant risks.

Optimism about the AI boom has contributed to nearly three years of a bull market in the U.S. stock market, with tech companies and firms related to data center construction and infrastructure seeing their stock prices soar.

Although U.S. stocks have risen for three consecutive years, many investors remain optimistic about the outlook through 2026, believing that AI will broadly boost corporate profits starting this year.

However, recent market sentiment has shifted to concerns about AI’s disruptive potential, impacting multiple industries such as software, legal services, and wealth management. Investors are re-evaluating how to assess the value of these companies.

In January this year, AI star company Anthropic released the AI collaboration tool Claude Cowork, triggering a sell-off in software stocks. As of Wednesday, the S&P 500 Software and Services Index has fallen 15% since the end of January.

This week, worries about AI’s disruptive potential have spread to other industries. Wealth management startup Altruist launched AI-powered tax planning features, causing brokerages’ stocks to plummet; online insurance platform Insurify released an AI-based price comparison tool built on ChatGPT, leading to declines in insurance brokers like Willis Towers Watson and Arthur J. Gallagher.

Meanwhile, skepticism over massive capital expenditures on AI is also pressuring the stocks of some of the world’s largest companies, including Google, Amazon, and Microsoft.

Google, Meta, Microsoft, and Amazon have all announced large capital expenditure plans, with these four tech giants expected to spend a combined $650 billion this year, primarily on expanding AI infrastructure.

Concerns that tech giants may not generate sufficient returns from these high capital investments have led to double-digit declines in Microsoft and Amazon stocks following their earnings reports.

Yung-Yu Ma, Chief Investment Strategist at PNC Financial Services Group, said, “The market worries they are spending too much… I believe this remains an open question.”

He added that he expects “some negative sentiment around spending to ease.”

Keith Lerner, Chief Investment Officer at Truist Advisory Services, stated, “The current challenge is that AI is developing too quickly. Corporate earnings remain strong, but companies find it difficult to counteract the negative market narrative.”

Some investors believe that as valuations become more attractive, buying opportunities are emerging.

When assessing the impact of AI development, Morningstar Stock Research Director Sean Dunlop said that an economic “moat” can help investors “distinguish quality companies from poor ones to some extent, and the current sell-off is quite blind, creating investment opportunities.”

JonesTrading Chief Market Strategist Michael O’Rourke stated in a report, “By 2026, less is more; the key to stock picking is avoiding collapse risk.”

(Original source: Cailian Press)