AI Earnings Growth Supports Equities
Strong corporate earnings growth and solid underlying economic conditions support equity valuations despite near-term volatility from geopolitical and policy risks.
Attention is building fast — up 4pp of coverage share over the last 3 days, now 4.1% of SPX coverage.
Corporate earnings are tracking significantly above expectations with S&P 500 Q2 earnings growth running at approximately 32% versus 23% projections, while underlying economic data shows strong consumer spending and core durable goods shipments supporting real GDP growth estimates above 3%. Labor market resilience, evidenced by declining unemployment claims, continues to underpin confidence in the economic foundation supporting equity valuations.
When actual earnings growth materially exceeds consensus expectations while economic activity remains robust, it validates the earnings yield that justifies current equity valuations. This alignment between earnings reality and economic momentum reduces the probability of multiple compression from fundamental deterioration, providing structural support for market levels.
Mainstream financial press is carrying this — attention has broadened beyond specialist outlets.
"The July consumer spending and core durable goods shipments data point to a strong real GDP growth rate in Q3 that looks to be running at least 3%. Corporate profits jumped by $400.9 billion after climbing by $74.4 billion in the first quarter. The latest reading was the second-largest increase in record profits."
"The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013, according to Bloomberg Intelligence. AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2."
"The S&P 500 added 0.2% and inched closer to its all-time high set earlier this month. Fewer U.S. workers applied for unemployment benefits last week, an indication that layoffs could be remaining low."
"Separate data showed the economy grew 1.5% in the second quarter, underscoring the resilience of the U.S. economy. Tuorto pointed to the strength of the underlying economy and corporate earnings as a counterweight to those concerns, saying earnings among companies owned by the firm and some larger-cap companies were 'standout.'"
"The outlook for strong Q2 earnings is a bullish factor for stocks. The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2."
"The outlook for strong Q2 earnings is a bullish factor for stocks. The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2."
"The outlook for strong Q2 earnings is a bullish factor for stocks. The S&P 500 is tracking for earnings growth of almost 32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013, according to Bloomberg Intelligence. AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2."
"An expensive market can remain expensive for months or years, particularly if corporate earnings continue growing fast enough to justify higher stock prices."
"The continuing parade of U.S. companies reporting bigger profits for the spring than analysts expected, meanwhile, continues to support stocks. Such growth is imperative because stock prices tend to follow the path of corporate profits over the long term."
"Strong profit reports for the spring from Estee Lauder, Target and other U.S. companies are also helping to support the stock market."