Industry Report: AI Investments Dominate the Scene as Alphabet Competes

The euphoria surrounding artificial intelligence (AI) continues to drive the stock performance of S&P 500 companies, but analysts expect a slowdown in profit growth. Expectations foresee a 5.3% rise compared to the previous year, significantly below the 13.2% increase in the second quarter, according to a Reuters analysis. Particularly the technology and communication services sectors have significantly contributed to the positive development. These sectors are expected to shine with profit growth of 15.4% and 12.3%. AI-related companies are at the center of reporting and are strongly driving market gains. The S&P 500 is currently marking historical highs, supported by a 21% price increase since the beginning of the year. Howard Chan, CEO of Kurv Investment Management, emphasizes that analysts are particularly focused on how large companies monetize their AI initiatives. Meta, for example, saw a share price increase after forecasting strong revenue growth. This shows that digital advertising revenues successfully support AI investments. Google, on the other hand, faces questions about integrating its AI expenditures into existing business models. With the S&P 500 trading at 22.3 times the projected earnings over the next twelve months, above the long-term average of 15.7, many investors hope that the current quarterly results will justify the high stock valuations. Solita Marcelli of UBS Global Wealth Management expressed optimism that the third-quarter results could stimulate further stock gains, especially since the semiconductor sector remains a focus of AI investments. Alphabet, better known as Google, was recently in the spotlight as Bank of America confirmed a buy recommendation despite challenges from a DOJ court case. The lawsuit seemed to weigh on the stock, but the initial remedies largely met investor expectations. The company is credited with a strong market position in the search domain. New CFO strategies and fewer layoffs compared to competitors could positively impact profit growth, according to analysts.