US equities are split down the middle, and the AI trade is the fault line.
The bull case, laid out in several established house views published this week, rests on resilient earnings revisions, an AI-driven lift to GDP (research estimates put it at roughly 0.8 percentage points in 2025 with more to come in 2026), and reasonable valuations outside mega-cap tech. One published S&P 500 target range floated by researchers sits at 8,000–9,000, conditional on rates falling and geopolitical risk easing.
A contrarian thread of recent research pushes back hard. Some analysts, citing BIS warnings, argue AI valuations are stretched well past historical norms and that a rotation out of AI names is already the first leg of a broader correction — with a second leg possible if the Fed tightens or AI payoffs disappoint.
The rotation is visible: researchers note the Equal-Weight S&P 500 hitting a record, industrials favored as AI-infrastructure beneficiaries, and quality, dividend growth and value framed as "better beta" than concentrated large-cap growth. Semiconductors remain the most contested corner.