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The extraordinary scale of America’s artificial intelligence investment boom has raised concerns that businesses could be sacrificing other projects to finance AI infrastructure. Goldman Sachs, however, believes the evidence of widespread displacement remains limited, even as AI spending approaches $600 billion and absorbs a growing share of corporate investment and debt issuance.

AI spending reaches significant share of U.S. investment

Goldman Sachs analyst Jessica Rindels expects U.S. AI investment to total almost $600 billion during 2026, “equivalent to nearly 2% of US GDP.”

The sector has accounted for more than 10% of business fixed investment in recent quarters, demonstrating how rapidly artificial intelligence has become a major component of corporate capital expenditure.

This concentration naturally raises concerns that spending on AI could come at the expense of factories, conventional technology upgrades or other corporate projects.

The heavy reliance on imported technology equipment also means the headline investment figures do not translate fully into domestic GDP growth.

Big Tech has cut buybacks rather than investment

For the largest technology companies, Goldman sees little evidence that AI infrastructure spending is forcing significant reductions in other capital projects.

Hyperscalers have partly financed their enormous AI programmes by allocating less cash to share repurchases.

They have also shown a willingness to tap debt markets.

Goldman said these companies have been “willing to borrow and appear undeterred by high interest rates.”

That financial flexibility allows the largest AI spenders to continue building infrastructure without necessarily making equivalent reductions elsewhere.

Corporate AI users show clearer evidence of displacement

Businesses consuming AI products and services present a different picture.

Goldman’s survey indicates that the absolute cost of adopting AI remains relatively small for most companies.

Yet around two-thirds of those expenses are being financed by reducing spending elsewhere.

This suggests AI adoption is already reshaping corporate budgets, although the amounts involved are not yet large enough to create a significant macroeconomic impact.

Data-centre construction reaches 9% of market

Data centres represent one of the clearest physical manifestations of the AI investment boom.

Goldman estimates that they now account for roughly 9% of private nonresidential construction expenditure.

Such rapid expansion might ordinarily be expected to create competition for labour, construction materials and other resources.

However, the data-centre boom has coincided with declining investment in subsidised manufacturing plants, helping offset some of the pressure.

As a result, Goldman has identified “only limited signs of crowd-out nationally.”

AI takes almost quarter of investment-grade issuance

The AI boom is also transforming corporate credit markets.

Financing associated with artificial intelligence now represents nearly one-quarter of investment-grade issuance, according to Goldman.

Despite this rapid increase, borrowing conditions for companies outside the AI ecosystem have not deteriorated significantly.

The bank said spillover effects “look limited so far,” pointing to non-AI credit spreads that remain near historically low levels.

That suggests debt investors have so far been capable of absorbing enormous AI financing requirements without materially restricting access to capital elsewhere.

Goldman estimates only $50 billion of additional crowding out

Goldman’s overall conclusion is that the economic consequences of the AI capital expenditure boom need to be viewed with more nuance.

The headline investment numbers are enormous, but imports reduce their direct contribution to domestic economic growth.

Meanwhile, evidence that AI is materially depriving other industries of financing, labour or construction resources remains relatively weak.

Goldman estimates approximately $50 billion of incremental crowding out during 2026, a relatively modest figure compared with the almost $600 billion expected to be invested in AI.

The bank therefore concluded that AI’s boost to GDP and the amount of other investment it displaces “are smaller than often thought.”

Citi remains confident that the S&P 500 can reach 8,100 by the end of the year, raising its full-year earnings projection after second-quarter results demonstrated stronger corporate momentum. While artificial intelligence leaders remain essential to further index gains, the bank believes a broader rally could provide the next catalyst if the U.S. economy delivers a soft landing.

Strong Q2 results prompt earnings upgrade

Citi raised its full-year S&P 500 earnings estimate from $350 to $365 following the latest reporting season.

The bank nevertheless kept its year-end target at 8,100, suggesting that the stronger earnings outlook reinforces rather than materially changes its existing market thesis.

Strategists led by Scott Chronert said the fundamental forces supporting the forecast “remain mostly in place.”

Accelerating sales, wider margins and resilient corporate profitability continue to provide support for the index.

Fed expectations could encourage broader rally

A reduction in expectations for additional Federal Reserve rate increases could help broaden market leadership.

Citi believes this process has already started and expects more stocks to participate if investors become increasingly confident that the economy can achieve a soft landing.

The bank’s preferred scenario resembles a “goldilocks” environment in which economic activity remains healthy without generating enough inflation to force substantially tighter monetary policy.

Such conditions could encourage investors to move beyond the narrow group of companies responsible for much of the market’s recent earnings growth.

AI remains essential to further S&P 500 gains

Despite expecting broader participation, Citi does not believe the S&P 500 can reach its target without continued support from artificial intelligence-related companies.

Revenue trends among businesses spending heavily on AI capital expenditure should provide a floor beneath the AI-sensitive part of the index “for now,” according to the strategists.

The bank said the AI-linked cohort remains “critical to further index upside.”

“Here, the issue is one of confidence in duration/persistence of current fundamental strength.”

The durability of AI investment and associated earnings growth therefore remains one of the biggest variables in Citi’s market outlook.

Headline earnings include non-operating boost

Second-quarter earnings surprises came in somewhat stronger than Citi had expected.

However, the bank cautioned against interpreting all of the improvement as evidence of stronger underlying operations.

Asset writeups at some megacap companies contributed significantly to consensus earnings and “cannot be directly attributed to operating performance.”

Removing or adjusting for those effects produces a somewhat less spectacular picture, although Citi still regards the fundamental backdrop as healthy.

Corporate margins provide genuine support

One of the more encouraging signals is that stronger earnings have been accompanied by improving underlying business trends.

Sales growth across the S&P 500 has accelerated, while profit margins have continued to expand.

The resulting earnings trajectory “looks more akin to post-recession circumstances,” according to Citi.

While non-operating gains complicate the headline figures, the simultaneous improvement in revenue and margins provides evidence that corporate fundamentals are genuinely strengthening.

Twenty stocks account for almost entire earnings upgrade

The concentration of earnings growth remains an important weakness.

Consensus S&P 500 earnings have increased by $49 this year, rising from $312 at the beginning of the year to $361.

Of that $49 increase, just 20 stocks account for $45.

The figures demonstrate that the apparent strength of aggregate index earnings continues to depend heavily on a relatively small number of companies.

Citi also noted that full-year consensus has increased by $20 since the end of the second quarter, but only $3 comes from higher third- and fourth-quarter forecasts.

That limited follow-through raises questions about whether the exceptional second-quarter momentum can continue.

Citi calls earnings tailwinds ‘undeniable’

Despite these concerns, Citi described the earnings support for equities as “undeniable.”

The bank’s caution relates more to the quality and distribution of earnings growth than to whether the overall backdrop is positive.

Asset revaluations have inflated some results, future-quarter revisions remain comparatively modest and a small number of companies account for most of the earnings upgrade.

A broader improvement in corporate profitability would therefore strengthen the case for another leg higher in the S&P 500.

Broadening could unlock the move to 8,100

For Citi, the route to 8,100 involves more than continued gains among the largest AI beneficiaries.

A soft economic landing, reduced fears of Fed tightening, stabilisation in technology and sustained AI fundamentals could encourage a wider range of companies to participate.

If that broadening develops while sales and margins continue improving, the market would become less dependent on a handful of megacap stocks.

That combination is central to Citi’s view that the S&P 500 still has room to reach 8,100 before year-end.

Citi has maintained an aggressive bullish outlook for silver, forecasting that prices could reach $90 an ounce within six to 12 months as investor flows become the dominant force in the market. Although structural changes in solar technology could weaken one major source of industrial consumption, the bank believes monetary conditions, geopolitical developments and continuing physical demand provide scope for substantial further gains.

Citi keeps $75 and $90 silver forecasts

Citi left its point-price forecasts unchanged, targeting silver at $75 per ounce over a zero-to-three-month period and $90 over the next six to 12 months.

With spot silver around $65 per ounce, the longer-term forecast implies significant additional upside.

The bank expects a “continued recovery in investment demand,” which could increasingly determine price movements even as the outlook for some industrial applications becomes less favourable.

Citi’s forecast therefore depends less on accelerating industrial consumption and more on investors increasing their allocations to precious metals.

Silver could amplify gains in gold

Silver’s relationship with gold is an important element of the forecast.

Citi expects the metal to “continue to track gold in direction with high beta,” potentially allowing silver to deliver larger percentage gains during a precious-metals rally.

The firm consequently views silver as “an ideal upside play” if geopolitical tensions surrounding the Strait of Hormuz are resolved quickly.

Citi’s base case anticipates de-escalation potentially “as soon as September-December,” which could alter the macroeconomic environment currently influencing precious-metal markets.

Fed shift could remove key silver headwinds

Higher real interest rates and a strong dollar have created a difficult backdrop for silver.

A less hawkish Federal Reserve could begin to reverse those pressures.

If real yields decline and the dollar weakens, precious metals may become more attractive to investors seeking alternative stores of value and portfolio diversification.

Citi believes that shift, combined with reduced geopolitical uncertainty, could trigger stronger investment flows into silver.

Those flows could become the primary catalyst behind the move towards the bank’s $90 target.

Solar technology creates industrial challenge

The industrial side of Citi’s outlook is less uniformly bullish.

Solar manufacturing has become an important source of global silver consumption, but producers are increasingly reducing the amount of metal used in individual cells.

This thrifting trend is being reinforced by the development of back-contact solar technology.

Citi expects BC adoption to accelerate and believes it could become a leading solar technology by 2028.

The transition could structurally reduce the amount of silver required by the photovoltaic sector, limiting one source of demand growth.

Technology demand helps offset solar weakness

Other emerging technologies could partially compensate for the weaker solar outlook.

Citi expects artificial intelligence, 5G infrastructure and electric vehicles to continue generating resilient demand for silver.

The metal’s electrical and conductive properties make it important across a range of advanced technology applications, providing broader industrial support beyond photovoltaics.

Combined with constrained supply, these sources of consumption are expected to keep the global silver market in deficit through 2027.

India emerges as important physical-demand driver

Indian buyers are also providing notable support to the market.

Citi pointed to an approximately 7% domestic premium for silver in India, signalling strong underlying physical demand.

The bank expects buying to strengthen during the fourth quarter as the country’s festive and wedding season increases consumption.

That physical demand provides another layer of support alongside potential investment inflows from financial markets.

$90 target increasingly depends on investors

Citi’s outlook suggests the next stage of silver’s rally could look different from earlier phases driven heavily by industrial consumption.

Solar demand may become less supportive, but AI, 5G and electric vehicles should continue providing an industrial foundation while the global market remains in deficit.

The bigger catalyst could come from investors.

If Federal Reserve policy becomes less hawkish, geopolitical tensions ease and silver continues to outperform gold during precious-metal rallies, Citi believes prices could first reach $75 before advancing towards $90 an ounce over the next six to 12 months.

JPMorgan expects global equity markets to extend their advance during the second half of the year, with stronger earnings, limited inflation pressure and a broader rotation towards cyclical and higher-beta stocks creating a supportive backdrop. While geopolitical risks and bond-market volatility remain concerns, the bank does not believe they will prevent major indices from reaching new records.

New market highs remain JPMorgan’s base case

The Wall Street bank continues to favour equities despite a long list of risks confronting investors.

“We believe equity indices should be making fresh all-time highs in 2H, and look for further upside,” the bank’s strategists said in a note.

JPMorgan has pushed back against fears surrounding geopolitical instability, inflation, concentrated market leadership, the direction of the economic cycle and weakness across bond markets.

Its central argument is that the macroeconomic and corporate earnings backdrop remains strong enough to outweigh these risks.

Market leadership could become less concentrated

One important element of JPMorgan’s outlook is an expected broadening of the equity rally.

The firm has been looking for greater participation beyond the largest index leaders for the past two months and continues to expect that trend to develop.

Momentum strategies have begun to recover, with semiconductors showing particular improvement.

However, JPMorgan does not anticipate another period in which technology dominates the entire market in the way it did last summer.

Instead, investors could see stronger participation from cyclical sectors and other areas that previously lagged the major technology names.

Market swings unlikely to disappear

JPMorgan still expects periods of elevated volatility as investors repeatedly reassess corporate profitability and economic conditions.

Profitability worries are “likely to keep coming back from time to time,” according to the strategists.

However, the bank sees an important difference between the present environment and the inflation shock experienced in 2022.

It does not expect significant additional inflation pressure and therefore sees less risk that central banks will be forced into a much more aggressive policy stance.

That should help limit one of the biggest potential threats to equity valuations.

Weak jobs data could become good news for markets

Signs of softness in the labour market could also work in favour of stocks under certain circumstances.

JPMorgan described employment conditions as mixed, with some indicators showing weaker sentiment around jobs.

That backdrop creates the possibility of a “bad is good” response from investors.

Softer labour data could reduce fears of economic overheating and make the Federal Reserve less inclined to tighten monetary policy.

A weaker dollar provides another potential benefit, particularly for markets and companies outside the United States.

Strong earnings underpin bullish outlook

Corporate profits remain central to JPMorgan’s argument for further market gains.

The bank had expected second-quarter earnings to provide reassurance, and the results have supported that view.

Year-over-year EPS growth has exceeded 20% in both the United States and Europe.

Such strong profit growth gives investors greater fundamental justification for elevated equity prices and could help markets absorb periods of volatility.

Defensive trade begins to fade

JPMorgan previously expected higher-beta stocks to consolidate while defensive, low-volatility areas enjoyed a temporary rebound.

Healthcare and consumer staples benefited from that shift, but the bank never expected the defensive move to persist throughout the second half.

It described the rotation as “likely to be only tactical,” lasting several weeks rather than becoming a sustained market trend.

That view appears to be playing out, with JPMorgan observing that low-volatility stocks “have rolled over again.”

The bank now expects higher-beta shares to regain momentum.

Banks, miners and industrials stand out

A steepening yield curve strengthens the case for cyclical market exposure, according to JPMorgan.

The strategists highlighted banks, mining companies, industrial stocks and consumer cyclicals as attractive areas.

Semiconductors could also stabilise after recent volatility, providing another source of market participation.

A stronger performance from these groups would make the rally less dependent on mega-cap technology and create healthier breadth across equity indices.

High-beta trade could drive next phase of rally

JPMorgan believes the combination of strong earnings, manageable inflation, less aggressive monetary-policy risks and broader market participation could support another leg higher for stocks.

“If the macro outlook we envisaged for 2H keeps gaining traction, that should be supportive for further equity upside, but also for more of a high beta outperformance,” the strategists wrote.

The bank therefore sees the possibility of both fresh index records and a change in leadership beneath the surface.

Rather than technology alone driving returns, JPMorgan expects cyclical and higher-beta stocks to play a larger role if its second-half economic scenario continues to unfold.

The U.S. market cycle has shifted into a Late Acceleration phase, according to Wolfe Research, after July’s ISM Manufacturing data provided further evidence of strengthening economic momentum. Robust AI infrastructure spending and an emerging inventory restocking cycle are helping drive the expansion, while U.S. equities have responded with strong gains at the start of August.

ISM data triggers market-cycle shift

Wolfe Research uses the six-month moving average of ISM New Orders as the central indicator in its market-cycle framework.

Following the latest manufacturing report, the measure has moved sufficiently to place the U.S. economy in Late Acceleration, the third phase identified by the firm’s model.

The classification points to an economy that remains in expansion but has moved further through the middle portion of the broader business and market cycle.

The next transition is expected once momentum in ISM New Orders reaches a peak.

US stocks rally as expansion gains momentum

Major U.S. equity benchmarks have performed strongly during the opening part of August.

The S&P 500 gained 3.6%, while the NASDAQ-100 advanced 5.1% and the Russell 2000 climbed 3.5%.

The S&P 500 also broke out of a roughly two-month trading range and reached new record highs.

The combination of improving economic indicators and strong equity performance has reinforced Wolfe’s assessment that the market has entered another stage of the expansion.

Hyperscaler AI investment drives industrial demand

One of the forces behind the stronger manufacturing environment is the enormous investment being made in artificial intelligence infrastructure.

Hyperscale technology companies continue to spend heavily on data centres, computing hardware and the wider infrastructure required to develop and operate increasingly sophisticated AI systems.

That spending is generating demand throughout technology and industrial supply chains and has become an increasingly important component of U.S. capital expenditure.

At the same time, wholesale inventories have declined relative to sales, encouraging businesses to rebuild stocks.

This restocking process provides another potential source of manufacturing demand as companies replenish depleted inventories.

Late Acceleration could continue into 2027

Wolfe Research expects the current market phase to remain in place until the six-month moving average of ISM New Orders reaches its eventual peak.

The firm believes that turning point could arrive late this year or during the opening part of 2027, potentially as the headline ISM index approaches 60.

Until then, the continued improvement in manufacturing momentum could provide a supportive backdrop for economically sensitive areas of the equity market.

Once new orders begin to peak, however, Wolfe’s framework would indicate that another market-cycle transition is approaching.

Fed expectations shift after weaker payrolls

Monetary policy remains an important variable for the outlook.

Investors are assessing inflation figures alongside signs of stronger manufacturing activity to determine whether economic acceleration could eventually generate renewed price pressures.

Expectations for the Federal Reserve to raise rates in September have declined following a weaker-than-expected payrolls report.

That change could provide some support for risk assets, although the path of inflation will remain critical to determining the Fed’s next moves.

Five sectors historically benefit from Late Acceleration

Wolfe Research identified Technology, Energy, Financials, Health Care and Industrials as sectors that have historically performed well during Late Acceleration.

Technology remains particularly exposed to the AI investment boom that is helping fuel the current manufacturing expansion.

Industrials could also benefit as capital expenditure and inventory restocking generate additional demand, while Energy has historically performed favourably as economic activity strengthens.

Wolfe nevertheless remains underweight Financials despite the sector’s typical performance during this phase.

The firm pointed to volatile interest-rate policy under the Kevin Warsh regime and the risk that the yield curve could invert during the first half of 2027.

ISM New Orders becomes key signal for next market move

For investors, Wolfe Research’s framework places particular importance on the direction of ISM New Orders over the coming months.

Continued improvement would support the view that the U.S. remains firmly in Late Acceleration, while an eventual peak would signal that the current phase is nearing completion.

With AI investment, inventory rebuilding, inflation and Federal Reserve policy all influencing the outlook, sector leadership could continue evolving as the market progresses through the cycle.

Traffic across the U.S. quick-service restaurant industry weakened modestly in July, according to Jefferies’ analysis of Placer data, with softer demand at chicken and pizza chains offsetting some of the improvement seen during June.

July gives back part of June’s traffic recovery

Jefferies Restaurants analyst Andy Barish reported that industry same-store sales increased 1.7% during July, approximately 10 basis points below the previous month’s performance.

The moderation reflected a roughly 20-basis-point deterioration in customer traffic, while average check strengthened by around 10 basis points.

Traffic declined approximately 2.1% for the entire month, compared with a roughly 1.8% decline through the first half of July, indicating that conditions weakened as the month progressed.

Potential disruption from Canadian wildfire smoke may have affected restaurant visits, according to Jefferies. Concerns surrounding Cyclospora-related foodborne illness could also have influenced customer behaviour towards the end of the month.

Higher checks support QSR sales

Quick-service restaurants continued to generate positive same-store sales despite softer customer visits.

QSR same-store sales remained at 1.8% compared with June, as an approximately 30-basis-point deterioration in traffic was counterbalanced by stronger average check.

Meanwhile, the two-year average trend improved by roughly 40 basis points month over month.

The combination suggests that pricing and customer spending helped protect restaurant sales even as traffic trends became less favourable.

Large restaurant chains see softer visits

Jefferies’ review of Placer data covering approximately 50 larger U.S. restaurant banners showed a clearer sequential slowdown.

Overall QSR traffic deteriorated by around 61 basis points compared with June.

The decline followed an approximately 145-basis-point improvement in the previous month, meaning July surrendered a meaningful portion of June’s recovery.

The figures nevertheless showed considerable differences between individual restaurant categories.

Burgers improve as chicken and pizza retreat

Burger restaurants performed comparatively well, with traffic trends improving by approximately 46 basis points sequentially.

Chicken chains weakened by around 60 basis points, reversing part of their earlier momentum.

Pizza restaurants experienced the largest deterioration among the categories highlighted by Jefferies, with traffic falling approximately 79 basis points compared with June.

These trends suggest that July’s weaker QSR performance was driven disproportionately by chicken and pizza rather than uniform weakness across fast-food restaurants.

Different datasets send contrasting signals

Jefferies also pointed to commentary from Lamb Weston that presented a somewhat different picture of restaurant demand.

In its fourth-quarter results, Lamb Weston described overall U.S. restaurant traffic as roughly flat, with QSR traffic also approximately unchanged.

Its category-level observations showed QSR chicken traffic increasing around 3%, while burger traffic declined approximately 4%.

The contrast with Jefferies’ Placer analysis may reflect differences in datasets, measurement periods or restaurant coverage, underscoring the importance of monitoring multiple indicators when assessing consumer behaviour.

QSR demand remains under scrutiny

July’s figures suggest that momentum across the U.S. fast-food industry moderated after June’s improvement, but the broader picture remains mixed rather than uniformly weak.

Same-store sales stayed positive, supported by higher average checks, while burger traffic showed sequential improvement even as chicken and pizza weakened.

The key question for restaurant companies is whether the July slowdown proves temporary or develops into a more sustained decline in visits. Consumer spending patterns, pricing and traffic trends will therefore remain important indicators for the sector as the second half of the year progresses.

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Freddie New, CEO: “We are delighted to be entering into this LOI with Zeus. Having the opportunity to contribute directly to what we hope will be a mutually beneficial relationship, directly providing Bitcoin liquidity to the Zeus wallet infrastructure, aligns exactly with our aims to normalise spending and sending Bitcoin and to compound our own holdings as a result.” Read more

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