Published research is deeply split on US stocks right now, and the fault line runs through AI spending.
One camp of analysts argues mega-cap tech is in real trouble. They point to Alphabet and Tesla posting negative free cash flow, sharp post-earnings selloffs, and a broader warning that hyperscaler free cash flow could turn negative by 2027. In this view, Magnificent 7 multiples have already compressed from 32x to 22x, dragging the S&P 500 from 23x toward roughly 19.5x. One bearish thread adds that deferred AI depreciation is quietly masking how stretched valuations really are.
The other camp holds that the AI investment cycle is still early, earnings fundamentals are sound, and the recent pullback is a healthy sentiment reset rather than a regime change.
Where the research converges: rotation. Multiple published views see capital moving out of crowded tech into financials, industrials, healthcare, energy, and railroads. Some analysts also flag selective upside in AI "picks and shovels" names and a multi-decade tailwind for US power from data-center electricity demand.