Barclays rejects claims that artificial intelligence has inflated into another tech bubble, but the bank warns a far wider set of stocks now faces heightened exposure if AI spending slows.
In a new CNBC interview, Venu Krishna, head of US equity strategy at Barclays, says the biggest technology firms are already reaping tangible benefits from AI.
“What I would say is that they are already monetizing it. So in their core businesses, which range from e-commerce to cloud services to advertising and other areas, they’re already deploying and monetizing it.
For example, in the software stack itself where their core businesses reside, the productivity improvement is about 30–40%. And that’s the reason why I think if you look at big tech, which is obviously bigger than just the hyperscalers but still a small group, you saw their net margins actually improve almost 200 basis points last quarter compared to now at this point in time.”
But Krishna warns that the AI narrative has now spread beyond the original beneficiaries. That expansion, he says, raises a different kind of risk. Barclays’ analysts mapped dozens of companies linked to the AI supply chain, finding that the downside risk for equities is meaningfully larger than the earnings impact if CapEx (capital expenditure) cools.
“So I think that is where we certainly see a risk. And to your point, when we did the bottoms-up work with our analysts to look at the impacted areas—call it about roughly 80 stocks—the earnings impact is about 3 to 4%.
But what we felt is the risk is much higher on the valuation front, call it 10% to 13%, because if you have a pullback in CapEx, it’s not just the affected company but also the hyperscalers to some extent, which can see some moderation in multiples.
So when you put those two things together, you’re looking at roughly a 15% plus hit to returns for equities should there be a slowdown.”
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