AI Stocks: Opportunities in the Technology Market and the Role of DigitalBridge

The current earnings season is capturing the interest of investors, particularly with regard to the profitability of investments in artificial intelligence (AI) among S&P 500 companies. Analysts expect profit growth to slow, with a forecasted increase in S&P 500 earnings of 5.3% compared to the previous year. This contrasts with the strong rise of 13.2% in the second quarter, as reported by Reuters. The technology and communication sectors are particularly in focus, with expected profit increases of 15.4% and 12.3%, respectively. Since last year, AI companies have been significantly driving earnings narratives, which has helped the S&P 500 reach new record highs. This year, the index has recorded an increase of about 21%, primarily due to the strong performance of the tech and communications sectors. Howard Chan, CEO of Kurv Investment Management, emphasizes that it is crucial how large companies benefit from their AI initiatives. An example is Meta, whose stock price surged after an optimistic sales forecast, indicating successful monetization of AI investments. In contrast, the AI spending of major players like Google raises questions regarding integration into existing business models. With the S&P 500 currently trading at 22.3 times future 12-month earnings estimates, exceeding its long-term average of 15.7, many investors hope that the quarterly reports will justify higher stock valuations. Solita Marcelli of UBS Global Wealth Management is optimistic that the upcoming quarterly results could drive further stock gains, particularly as the semiconductor sector remains a focal point of AI investments. DigitalBridge Group positions itself as a relevant player in the field of digital infrastructure. JPMorgan analyst Richard Choe recently raised the price target for DigitalBridge from $22 to $23 and rates the stock as overweight. The increasing demand for hyperscale data centers is driving the overall market, according to the consulting firm, and is fueling strong demand for digital transformations. Insiders see promising investment opportunities in Digital Realty and DigitalBridge in the area of AI data centers.