I think AI capex is going to continue, says Wells Fargo's Kwon

Watch on YouTube ↗  |  January 08, 2026 at 19:54  |  3:22  |  CNBC
Speakers
Ohsung Kwon — Chief Equity Strategist, Wells Fargo

Summary

Wells Fargo Chief Equity Strategist Ohsung Kwon discusses the upcoming earnings season, AI capex, and a potential reflation/restocking cycle. He remains constructive on the S&P 500, standing by a year-end target of 7,800, and expects Q4 earnings weakness to be overlooked because growth remains above trend and the outlook could improve. He also says it is too early to call a peak in AI capex, arguing hyperscalers will keep spending, and he likes the reflation side as inventories normalize.

  • Earnings growth is expected to decelerate in Q4 but remain around 8% year over year, above the typical 6%.
  • Kwon is standing by his year-end S&P 500 target of 7,800.
  • AI capex is expected to continue, with hyperscalers unlikely to cut spending in an AI arms race.
  • The market may be entering a reflation and restocking cycle as inventory levels normalize.
  • Fiscal tailwinds and possible Fed monetary tailwinds could support the outlook.
  • The host notes strength in metals and memory stocks, while Nvidia has been choppier.
Ideas
Ohsung Kwon Chief Equity Strategist, Wells Fargo 0:14
Year-end S&P target remains 7,800.
He is standing by his year-end S&P 500 target of 7,800. Although Q4 earnings growth is decelerating, he expects about 8% year-over-year growth, above the typical 6%, and thinks Q4 weakness can be overlooked because the market may be on the cusp of a reflation cycle and demand recovery; the key is that the earnings outlook holds.
SPY HIGH
Ohsung Kwon Chief Equity Strategist, Wells Fargo 1:47
AI capex continues; hyperscalers won't cut.
He thinks AI capex will continue and it is too early to call a peak. Even though the market is now pushing back on capex, this happened in 2024 too, and cutting capex is the last thing hyperscalers will do because it is an AI arms race. He says AI capex has to hold for the market.
AI capex HIGH
Ohsung Kwon Chief Equity Strategist, Wells Fargo 2:37
Likes reflation on restocking cycle.
He still likes the reflation side given coming fiscal tailwinds and the possibility that the economy is entering a restocking cycle. He notes the inventory cycle had its first positive reading in three years in December and inventory levels are normalized after three years of destocking, which could support demand and manufacturing recovery.
Reflation MED
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This CNBC video, published January 08, 2026, features Ohsung Kwon discussing SPY, AI capex, Reflation. 3 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Ohsung Kwon  · Tickers: SPY, AI capex, Reflation