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Wall Street Bullish on AI-Driven Market Amid Economic Uncertainty
5 Aug
Summary
- S&P 500 earnings growth exceeds expectations at 10.3%
- Big Tech to invest $364 billion in AI in 2026
- Morgan Stanley bullish on stocks over next 12 months
As of August 5th, 2025, the US economy is facing a slowdown, with the major indexes experiencing their worst single-day drop of the summer last week. However, Wall Street strategists remain confident in the path higher for the S&P 500, buoyed by strong earnings growth and the continued adoption of AI technology.
According to FactSet data, the S&P 500 is pacing for year-over-year earnings growth of 10.3%, well above the 5% expected at the start of the reporting period. Additionally, Big Tech giants are set to spend another $364 billion on AI investments during 2026, further fueling the AI-driven bull market.
Despite the economic drag from factors like tariffs, the fundamental strength of US corporations, driven by AI, appears to be cushioning the blow. Morgan Stanley's equity strategy team has declared themselves "buyers of pullbacks" and are bullish on the market over the next 12 months, citing positive operating leverage, AI adoption, and pent-up demand in many sectors.
BlackRock's Investment Institute has also noted the "tug-of-war" between economic headwinds and corporate resilience, ultimately siding with the AI theme and US stocks. As the "AI arms race" continues, investors remain confident in the long-term prospects of the market, even as the near-term outlook remains uncertain.
