AI investment is lifting stock indexes and supporting spending

In short: Money flowing into AI companies is pushing up major stock indexes and helping support consumer and business spending, but prices may be getting ahead of today’s real-world results.

What's going on

AI-related stocks have become a major reason the US stock market is up. LPL Financial says AI-linked companies account for about half of the S&P 500’s gains this year. Since late 2022, after ChatGPT drew wide attention, investors have increasingly treated AI as the main growth story in markets.

Goldman Sachs estimates that the total market value of companies tied to the AI surge has risen by more than $19 trillion since late 2022. That includes chipmakers, big cloud computing providers (companies that rent out computing power like a utility), and private AI model firms. J.P. Morgan points to very large expected spending by five major US tech companies on equipment and buildings needed for AI, with 2026 estimates around $697 billion.

This money is also showing up outside stock charts. The New York Times reports that trillions of dollars are being directed into semiconductor factories, data centers (warehouses full of computers), and the energy and power lines needed to run them. Gains in AI stocks have also boosted the portfolios of wealthier households, which can lift spending on travel, dining, and luxury goods.

What to watch

Several research groups warn that stock prices may be assuming faster benefits from AI than the economy has delivered so far. If profits do not rise as quickly as investors expect, AI stocks could swing sharply, like a crowded theater where everyone heads for the exit at once.

Source: NYTimes