Beyond the Economic Downturn: How AI is Reshaping the US Stock Market
The US economy appears to be weakening. Recent economic data, including non-farm payroll numbers showing only 73,000 new jobs in July and significant downward revisions to previous months, point to a potential crisis. The manufacturing and services PMIs are also deteriorating, with the manufacturing index now in contraction territory.
Despite these warning signs, the stock market is telling a different story. The S&P 500 is hitting new highs, and high-performing stocks are abundant. This paradox can be explained by a single factor: AI.
The Driving Force: AI's Impact on Corporate Earnings
The recent earnings season has been phenomenal, with S&P 500 earnings growth reaching 11.8%, far exceeding expectations. This is largely driven by companies that are successfully leveraging AI.
* Microsoft's Azure cloud service saw a significant jump in growth, thanks to increased demand for AI capabilities.
* Meta used AI to boost advertising monetization, leading to a 22% increase in revenue.
* Palantir, a data analysis company, reported a massive 48% growth, largely due to its AI-powered services.
* Other companies, like Duolingo and Shopify, have also seen a direct positive impact on their user engagement and revenue from AI-driven features.
This trend highlights a new investment logic: AI drives corporate earnings, and the market rewards earnings. Companies with strong AI integration are thriving, while those without it are struggling under broader economic pressures.
The Investment Strategy: Focus on AI Opportunities
For the second half of the year, my strategy is to remain bullish. While macroeconomic risks like inflation from tariffs could cause short-term market volatility (a potential 5-10% correction), these should be seen as buying opportunities for long-term investors, not a reason to panic. The real focus should be on seizing the immense opportunities presented by AI.
AI adoption is still in its early stages, and its potential for future growth is huge. The risk of missing out on this growth is far greater than the risk of high valuations in these companies.
A particularly interesting area for investment is economically sensitive, AI-related companies. These companies, such as Tesla, Meta and Amazon, have been hit by macroeconomic pressures, making their valuations relatively cheap. However, their AI capabilities position them for a strong rebound in the coming recovery cycle.
