tl;dr
Wells Fargo's Oshung Kwon predicts AI and semiconductor firms will drive a 4% earnings beat, shifting investor focus from Fed policy to growth sectors as markets rotate into AI-driven stocks.
**Wells Fargo Strategist Predicts AI-Driven Earnings Beat as Market Shifts Focus from Fed to Growth**
In a recent CNBC interview, Oshung Kwon, Wells Fargo’s top equity strategist, highlighted a compelling forecast for corporate earnings in the third quarter, emphasizing the pivotal role of artificial intelligence (AI) and semiconductor firms. Kwon’s analysis, powered by advanced machine learning models, suggests that AI-related companies will lead a significant earnings beat, signaling a potential shift in market dynamics.
Kwon’s team evaluated over 350 macroeconomic variables using machine learning to identify trends in corporate sales. The results point to a projected 4% earnings beat for the quarter, with AI and semiconductor sectors at the forefront. “We’re forecasting about a 4% beat, led by AI and [semiconductors],” he said, underscoring the growing influence of these industries.
While much of the market remains fixated on Federal Reserve policy, Kwon argues that AI’s impact on growth now outweighs the Fed’s immediate influence. “I think AI matters more than the Fed. For broadening, I think the Fed matters. Outside of that, I think it’s really more about growth,” he stated. This perspective reflects a broader investor shift toward sectors with strong growth potential, particularly those leveraging AI advancements.
The strategist also noted that the market’s reaction to the Fed’s recent pivot toward an easing cycle has already unfolded. Investors, he explained, have rotated out of interest-rate-sensitive sectors—such as real estate and utilities—back into AI-driven stocks. “There was a lot of optimism heading into the FOMC that the Fed might be easing into a re-acceleration cycle. That’s when we saw the easing cycle trade happening, whether it be the Russell 2000 or home builders. Now that we are in an easing cycle, officially, we’re seeing selling the news and rotating back into AI,” Kwon said.
Kwon’s comments highlight a growing confidence in AI’s transformative potential, even as monetary policy remains a critical backdrop. “Outside of AI, I’m not really excited about anything,” he added, signaling a stark focus on the sector’s ability to drive sustained growth.
As the Q3 earnings season approaches, Kwon’s insights suggest that AI and its associated industries could dominate market narratives, overshadowing traditional macroeconomic concerns. For investors, the message is clear: the future of growth may lie in the hands of those leading the AI revolution.