The AI explosion of recent years has touched the furthest reaches of most industries, not least of all wealth management. Massive spending on AI infrastructure is also fueling economic and earnings growth while advisors and their clients eye opportunity within the space.
The S&P 500, which has AI darling Nvidia Inc. (Ticker: NVDA), Apple Inc. (Ticker: AAPL), Microsoft Inc. (Ticker: MSFT), Amazon.com Inc. (Ticker: AMZN) and Alphabet Inc. (Ticker: GOOGL) as its top components, is up more than 10% this year. The index, which has set a number of records this year, registered another all-time closing high earlier this week.
“The enthusiasm for stocks is warranted given the unprecedented spending spree on AI infrastructure combined with stable employment and relatively resilient consumer spending,” said Emily Bowersock Hill, CEO and founding partner at Bowersock Capital Partners, in a statement. “Companies have been able to use inflation and tariffs as an excuse to improve efficiency and raise prices.”
AI spending, which has been booming for years, is certainly reaching eye-watering levels. Citing Goldman Sachs and Morgan Stanley analysts, who have recently revised their forecasts upwards, Reuters reports that AI-related CapEx is expected to hit approximately $800 billion in 2026.
“As the AI story continues to unfold, the space is bifurcating, with investors assigning winners and losers,” said Bowersock Hill. “Stocks like Snowflake and Micron are skyrocketing after positive earnings, as investors hunt for the next Nvidia.”
Shares of Micron have soared more than 236% this year and the semiconductor maker hit a milestone this week when it surpassed $1 trillion in market cap for the first time.
Snowflake’s stock spiked this week, buoyed by strong first-quarter results and news of a new AI deal with Amazon.
All this, of course, is playing out against a backdrop of months-long geopolitical tensions. “Investors expect the AI infrastructure boom to continue to mask the negative impact of geopolitical disruption,” said Bowersock Hill. “Stock markets care about company profits, as long as earnings grow, stock prices can continue to rise.”
“Investors expect the AI infrastructure boom to continue to mask the negative impact of geopolitical disruption,” said Bowersock Hill. “Stock markets care about company profits, as long as earnings grow, stock prices can continue to rise.”
While companies such as Uber Technologies Inc. (Ticker:UBER) have voiced concern about the rising cost of AI, the technology’s rise is inexorable. Reuters reports that Morgan Stanley analysts have hiked their 2027 CapEx AI outlook to $1.12 trillion.
The Federal Reserve also has AI-positive leader at its helm. All the signs are that advisors and investors can expect a pro-AI stance from new Fed chair Kevin Warsh, who has been vocal in his support for the technology. Warsh championed AI during his confirmation hearing last month. “The pace of change in these technologies is accelerating,” he said. “AI, which I think of really as American ingenuity, gives America a huge headstart relative to our competitors around the world.”
“Kevin Warsh is relying on his belief that AI will boost productivity growth and lower inflation, as in past technology-driven growth periods, allowing him to lower interest rates and shrink the Fed's balance sheet,” said Bowersock Hill.
However, she warns that this could also impact inflation. “In the short-term, unfortunately, the stimulative spending on the AI buildout is likely to be inflationary – witness DRAM semiconductor shortages and rising electricity prices -- which are already appearing in the CPI data,” she said. “At this rate, we would not be surprised to end the year at 4% inflation.”
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