Unprecedented AI-driven earnings boom fuels equities
Warren Pies argues that the stock market is entering a massive, non-recovery earnings boom driven by AI CapEx and frontier model advancements, which will continue to propel equities higher.
The argument
He points out that next-twelve-months earnings estimates have risen 25% over the past year, a vertical trajectory typically only seen after deep economic crashes. While critics worry about top-heavy concentration in semiconductors and oil, Pies argues that under-the-surface earnings revisions for the median stock are highly robust and characteristic of a healthy mid-cycle expansion.
The thesis, stress-tested
✓ What validates it
- ✓Continued upward revisions in next-twelve-months earnings estimates during upcoming earnings seasons
- ✓The equal-weight S&P 500 index confirming new highs within a 90-day window
▸ Risks discussed
- ▸Worst-case escalation in the Middle East disrupting oil supply through the Strait of Hormuz
- ▸Potential capital misallocation if massive AI CapEx fails to yield expected returns
Hear it yourself
"But, I mean, once that leak happened, the market's basically been straight up every day more or less, and it's been lead led by the areas you would expect. And so that mythos leak, I think, what it represented was that frontier models continue to get better. You can feed more compute, better models. That whole train of events is intact, and that is honestly the lifeblood of the current bull market. So straight of Hornblues closure, we can get into that. The explosion in compute demand and improvement of frontier models, we We can also talk about that. Like, these are the two things fighting it out."
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