Wells Fargo recently upgraded Alphabet, Google's parent company, to an Overweight rating, setting a price target of $387. Analyst Ken Gawrelski highlighted Google's strong position in artificial intelligence, attributing it to the company's significant data resources, broad distribution networks, and robust computing power. Google's AI compute capacity is projected to expand substantially, reaching 35 gigawatts by 2028, which is expected to further solidify its competitive advantage. The firm also anticipates substantial revenue generation from Google's Gemini AI service.
In the broader AI investment landscape, Cantor Fitzgerald, led by Howard Lutnick, made a notable $126 million investment in IREN Limited. This company is actively transitioning its focus from Bitcoin mining to AI infrastructure, positioning itself as a crucial provider for the expanding AI sector. This move aligns with a trend where other major firms are increasing their stakes in AI-related companies such as Amazon and Nvidia, signaling a growing emphasis on the foundational elements supporting AI development.
However, the rapid growth of AI also brings market concerns. Citrini Research suggests that a highly successful AI economy could paradoxically lead to a significant stock market downturn, potentially causing the S&P 500 to drop by 38% from its October 2026 highs by June 2028. This scenario envisions widespread economic disruption and increased unemployment. Financial stocks, including major players like American Express and JPMorgan, have already seen declines due to investor worries about AI's impact on traditional revenue streams, such as payment processing fees.
Further illustrating market anxieties, Blue Owl Capital's decision to gate its $1.6 billion private credit fund and sell loans has raised alarms about liquidity in the private credit market, especially concerning AI-related investments. Meanwhile, some physical industries are seen as beneficiaries; General Electric (GE) and other aerospace and manufacturing companies are poised to gain from AI disruption, with GE Aerospace already integrating AI into its Flight Deck platform. On the consumer front, Chinese AI glasses sales surged by 80% in Shenzhen, indicating strong demand for AI-powered wearables. Investors are advised to approach the AI boom with caution, drawing lessons from past tech cycles that highlight the difficulty in identifying long-term winners amidst high volatility.
Key Takeaways
- Wells Fargo upgraded Alphabet/Google to Overweight with a $387 price target, citing its AI leadership in data, distribution, and computing power.
- Google's AI compute capacity is projected to reach 35 gigawatts by 2028, with its Gemini AI service expected to generate significant revenue.
- Cantor Fitzgerald invested $126 million in IREN Limited, an AI infrastructure company transitioning from Bitcoin mining.
- Other major firms are increasing investments in AI-related companies like Amazon and Nvidia.
- Citrini Research predicts a potential 38% drop in the S&P 500 by June 2028 if AI exceeds expectations, causing economic disruption.
- The AI trade is shifting focus from digital sectors to physical industries such as energy, materials, and industrials.
- Financial stocks, including American Express and JPMorgan, declined due to concerns about AI impacting payment processing fees.
- Blue Owl Capital gated its $1.6 billion private credit fund, raising concerns about liquidity and risks in AI-related investments.
- Sales of AI glasses in Shenzhen surged by 80%, indicating growing consumer adoption of AI-powered wearables in China.
- The current AI boom presents challenges similar to past tech cycles, advising a diversified and patient investment approach.
Wells Fargo upgrades Alphabet citing AI leadership traits
Wells Fargo has upgraded Alphabet, the parent company of Google and YouTube, to overweight. Analyst Ken Gawrelski believes Alphabet possesses three key traits for AI success: data, distribution, and computing power. The firm raised its price target for Alphabet shares to $387, suggesting a potential 22% increase. Alphabet's AI compute capacity is projected to expand significantly by 2028, giving it a competitive edge. The company also expects its Gemini AI service to generate substantial revenue.
Wells Fargo upgrades Google citing AI compute advantage
Wells Fargo upgraded Google's stock, rating it Overweight and setting a price target of $387. Analyst Ken Gawrelski highlighted Google's strengths in data, distribution, and compute capacity as key to leading in artificial intelligence. The firm's analysis shows Google's compute capacity will grow to 35 gigawatts by 2028, widening its lead over competitors. Wells Fargo also increased its Google Cloud revenue and profit forecasts, and expects significant growth in Gemini's subscription revenue.
Cantor Fitzgerald invests $126 million in AI infrastructure stock IREN
Cantor Fitzgerald, led by Howard Lutnick, has invested $126 million in IREN Limited, a company transitioning from Bitcoin mining to AI infrastructure. This investment comes as Cantor Fitzgerald's portfolio value decreased, with a focus shifting towards AI and tech infrastructure. Other major firms are also increasing their investments in AI-related companies like Amazon, Micron, and Nvidia. IREN is seen as a key player in providing the necessary infrastructure for the growing AI sector.
AI boom could cause S&P 500 to drop nearly 40%
A new analysis from Citrini Research suggests that a highly successful AI economy could lead to a significant stock market downturn. The report, written from the perspective of June 2028, predicts a 38% drop in the S&P 500 from its October 2026 highs. This scenario arises if artificial intelligence meets or exceeds expectations, potentially causing widespread economic disruption and a sharp increase in unemployment. The commentary has generated considerable discussion online.
AI trade shifts focus to physical industries over digital
The stock market is experiencing a significant rotation, with investors now favoring physical industries like energy, materials, and industrials over digital sectors such as software and technology. This shift contrasts with the previous year's AI trade, which heavily favored software companies. The move reflects a growing belief that the AI revolution's infrastructure and supply chain needs are best met by physical world companies. This trend is also evident in the outperformance of the equal-weight S&P 500 over the market-cap-weighted index.
Financial stocks decline amid AI concerns
Major financial companies, including American Express, JPMorgan, Citigroup, Morgan Stanley, Mastercard, and Visa, saw their stock prices fall on Monday. Investors are concerned about the potential impact of artificial intelligence on the industry's significant revenue from payment processing fees. The decline reflects ongoing analysis of how AI advancements might affect the financial services sector's business models and profitability.
GE and other stocks poised to benefit from AI disruption
General Electric (GE) and other companies in the aerospace and manufacturing sectors are identified as potential winners as artificial intelligence disrupts various industries. GE Aerospace is already using AI tools in its Flight Deck operating platform. While sectors like software and financial technology face disruption from AI, manufacturing and aerospace are seen as more resilient and potentially advantageous in the evolving economic landscape.
Blue Owl's fund issues raise concerns in private credit market
Blue Owl Capital's decision to gate its $1.6 billion private credit fund and sell loans has caused concern in the private credit market. This action highlights potential liquidity issues and the risks associated with AI-related investments. Blue Owl's significant investments in AI infrastructure and software could be impacted by a slowdown in AI spending or rapid technological advancements. The market reaction has led to a selloff in Blue Owl's shares and raised broader fears about liquidity strains in the private credit sector.
Chinese AI glasses sales surge amid high demand
Sales of AI glasses in Shenzhen's Huaqiangbei electronics market have surged by 80%, contributing to a 35% year-on-year increase in total revenue for the market. This strong demand indicates a growing consumer interest and adoption of AI-powered wearable technology in China. The surge in sales highlights the increasing popularity and market penetration of AI glasses.
AI boom lessons from past tech cycles
Navigating the AI boom is challenging, similar to the dot-com era, with high expectations and significant market volatility. Identifying long-term winners is difficult, as demonstrated by past technological revolutions where many companies failed despite initial promise. The current AI wave involves massive capital investment and rapid innovation, creating uncertainty about future payoffs. Investors are advised to adopt a diversified and patient approach, acknowledging both AI's transformative potential and the inherent risks.
Sources
- Wells Fargo upgrades Google-parent Alphabet, says it has '3 key traits of AI winner'
- Google upgraded as Wells Fargo cites widening AI capacity lead By Investing.com
- Howard Lutnick's Cantor buys $126 million of surprising AI stock
- There’s another AI-doom post doing the rounds. This time, the S&P 500 dives nearly 40%.
- Stock Market Outlook: AI trade favors the physical over digital
- Financial Stocks Take a Hit With AI Worries on Investors’ Minds
- GE and 5 More Stocks That Can Win as AI Shakes Up the Economy
- Blue Owl’s gated fund jolts private credit as AI bets collide with liquidity risks
- Chinese AI glasses sales surge on strong demand
- AI Stocks and the New Tech Cycle: Lessons From Past Booms and Busts
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