Equity Outlook: AI Enthusiasm Leaves Little Margin for Error

Global equities recovered sharply in the second quarter as AI optimism and easing geopolitical fears lifted risk appetite, but the rally has left markets looking fully priced.

The biggest question now is whether heavy AI capital spending can translate into durable profits, especially as cash flow pressure builds and growth in spending starts to slow.

That makes crowded technology positions more vulnerable to disappointment, while broader opportunities may be emerging in regions and sectors with stronger valuations and less benchmark concentration.

Earnings remain supportive across a wider set of industries, yet high valuations, rising equity issuance and macro uncertainty mean investors should stay selective and avoid relying on a smooth AI outcome.