AI Boosts Tech Profits, Not Rest of Market

New artificial intelligence models from companies like Anthropic PBC and Altruist Corp. are significantly impacting industries, yet Wall Street's projections indicate that only a select few technology giants will truly benefit from AI-driven productivity gains this year. The Magnificent Seven, including Microsoft Corp. and Alphabet Inc., have seen their estimated 2026 earnings growth increase to 18% from 14% following a May selloff. In contrast, the remaining 493 companies in the S&P 500 Index have seen their earnings growth expectations fall to 11% from 12.5% during the same period.

Outside the tech sector, AI is not expected to substantially improve corporate profitability or profit margins. Without its largest sector, the US stock benchmark's earnings growth would be approximately half of its projected 14% expansion. Citigroup Global Markets Inc. suggests investors look to small- and mid-cap AI enablers outside the S&P 500 for more meaningful earnings growth, noting a 13% increase in earnings revisions for this cohort over the last nine months.

Companies like Coherent Corp., Pure Storage Inc., nVent Electric Plc, and Lumentum Holdings Inc., identified as AI enablers, have seen their stock prices rise this year, with Lumentum shares up 63% year to date. Even companies not directly in tech, such as Generac Holdings Inc. and Comfort Systems USA Inc., are benefiting from the AI buildout, with their shares climbing due to the demand for backup power and cooling systems for data centers. Sectors like utilities and industrials are projected to grow earnings at 7.7% and 11% respectively in 2026, driven by the capital expenditures necessary for hyperscaler buildouts. However, this growth is attributed to spending by other companies rather than direct AI productivity gains. For now, the concentration of earnings growth momentum remains with technology stocks, which have seen the most positive earnings estimate revisions.