AI, tech to power market to new highs again, says Evercore ISI's Emanuel
Speakers
Julian Emanuel
— Evercore ISI
Brian Sullivan
— Anchor, CNBC (Last Call / Power Lunch)
Summary
Julian Emanuel of Evercore ISI joins CNBC's Power Lunch to discuss his bullish market outlook. He expects AI and tech leadership, especially in communication services, consumer discretionary, and infotech, to continue powering the S&P 500 to new highs. He also sees strong hyperscaler capex and solid mega-cap earnings, but warns that near-term geopolitical risk is underpriced in a low VIX and that higher long-term rates are a longer-term concern.
- Julian Emanuel is bullish on U.S. equities and the AI trade.
- He expects communication services, consumer discretionary, and infotech to keep leading.
- Hyperscaler capex shows no peak and supports the AI runway into 2026.
- Mega-cap tech earnings are expected to beat, with high single-digit growth sufficient.
- Near-term risk is seen as underpriced with VIX around 14.
- Higher long-term rates are flagged as the biggest longer-term concern.
Ideas
Bullish S&P 500 on AI leadership.
Emanuel is bullish on U.S. equities and expects the S&P 500 to reach new record highs, with the interview citing a year-end target of 7,750. He argues AI and tech leadership can power the market, and he assigns a 30% chance to a bubble scenario reaching 9,000 on the S&P 500 (30x $300 earnings) if the Fed is over-stimulative.
AI leaders keep leading sectors.
The AI names and themes that have led for the past three years in communication services, consumer discretionary, and infotech will continue to lead. He acknowledges the AI trade is at a consensus but is happy to hold that view, citing the historical tendency for bull-market capital-markets activity to be led by the names and themes that got you there, plus strong AI capex appetite.
Mega-cap tech earnings can drive gains.
Looking at AI/mega-cap tech names such as Nvidia and the Magnificent 7, he expects them to beat earnings because beat rates have been high throughout the cycle. He thinks high single-digit full-year growth will be sufficient to drive these names even with elevated expectations, while flagging that low VIX and high near-term expectations warrant caution.
VIX too low; risk underpriced.
With the VIX around 14 and very high earnings expectations, he sees a near-term pause. He says the geopolitical backdrop and the complexities around the White House visit make near-term risk underpriced, implying volatility should be higher.
AI capex runway remains strong.
Hyperscalers and AI enablers show no peak in capex appetite, and a hyperscaler's announcement that morning about acquiring more power capacity bodes well for the AI runway into 2026. This supports continued strength in AI infrastructure spending and related enablers.
