Wells Fargo’s top equity strategist says artificial intelligence is powering a new bull market that still has room to run to the upside.
In a new CNBC interview, Wells Fargo chief equity strategist Ohsung Kwon says the current surge in stocks is not a speculative frenzy, but the product of structural forces reshaping spending across the economy.
He says today’s tech equipment spending does not justify bubble calls when compared with past cycles in technology.
“I think this is an AI-led bull market, and I think this is likely to continue. First of all, it’s not a bubble. The entire outperformance of the Nasdaq since the end of the tech bubble has been driven by better fundamentals in the Nasdaq versus the S&P 500, and I think that’s likely to continue.
Second, we still think we are in the early innings of the AI investment cycle. So if you look at tech equipment spend, basically semis and hardware as a percentage of total US GDP, it peaked at around 2.6% during the PC boom in the 1980s, 2.9% in 2000.
Right now, it’s only at 2.0%, which means that to get to that 2.9% in 2000, tech equipment spend has to go up by 47% on top of GDP growth, which is obviously very significant.”
But Kwon warns that his 7,200 S&P 500 prediction by the end of 2026 will be at risk if this happens.
“I think AI CapEx is probably the single biggest risk to the equity market. We don’t see that turning anytime soon. Like I said, I think this investment cycle continues.
The other risk could be a potential further slowdown in the economy. I think good news is good news right now for equities. I think a further rate drop from here would be bearish for equities. That’s essentially the position. So we’re overweight AI, sort of market weight defensives, and we are actually underweight cyclicals.”
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