Wall Street Looks to AI to Drive Stocks Higher Amid Strong Earnings
Despite a modest sell-off last Friday, stocks remain close to record levels as Wall Street gears up for the start of earnings season, with banks set to report in the coming week. Investors are hoping for continued momentum in what has been a remarkable AI-driven rally this year.
The S&P 500 (^GSPC) has surged more than 30%, gaining roughly 1,800 points since April, while the Nasdaq Composite (^IXIC) has jumped nearly 50% over the same six-month period, highlighting an impressive market upswing.
Analysts expect S&P 500 companies’ third-quarter earnings to increase by about 8% compared to last year, which would mark the ninth consecutive quarter of profit growth, according to FactSet data. Technology firms, particularly in the software and semiconductor sectors, are leading the way with optimistic earnings guidance this season.
The recent high-profile partnership between OpenAI, the maker of ChatGPT, and chipmaker AMD has prompted renewed discussion about whether the market might be overheating. “Valuations are high, so it’s reasonable to take a closer look,” said Lisa Schreiber, investment analyst at Gradient Investments, in an interview with Yahoo Finance.
However, many experts remain confident that the rally is fundamentally justified. “I don’t believe we are in a bubble because companies continue to exceed earnings expectations quarter after quarter,” Schreiber added.
Currently, the S&P 500 trades at roughly 25 times expected earnings for the year, a level that, according to Nicholas Colas, co-founder of DataTrek Research, “reflects strong confidence — perhaps more than necessary — that corporate profits will meet expectations.”