As the US stock market navigates shifting macroeconomic conditions, Wall Street analysts are increasingly recommending a pivot from high-risk AI investments to safer, defensive stocks. However, recent developments indicate a surge in power and infrastructure-related ETFs, driven by strong demand for AI chips. Over the past month, these ETFs have rebounded by more than 20%, with the KODEX U.S. AI Power Core Infrastructure increasing by 27.51% from September 11 to October 11 [98a3b940]. The SOL U.S. AI Power Infrastructure also saw a notable rise of 21.74%, while the KODEX AI Power Core Equipment in South Korea recorded an 11.85% return [98a3b940].
In contrast to the defensive stock recommendations, the recent performance of power stocks reflects the ongoing expansion of the AI industry. Companies like Hyosung Heavy Industries, LS Electric, and HD Hyundai Electric have seen their stocks rise by 28.84%, 12.46%, and 10.79%, respectively [98a3b940]. Additionally, the KOSEF Global Power GRID Infrastructure increased by 7.13%, further demonstrating investor confidence in this sector.
This surge in power-related stocks comes after earlier concerns about a potential peak in the AI market and a slowdown in Nvidia's stock, which led to a market correction in July. However, Nvidia's recent stock rebound has improved overall investor sentiment [98a3b940].
Furthermore, the Biden administration's investments in power grid and renewable energy initiatives have provided additional support for this stock rally, highlighting the interconnectedness of AI advancements and infrastructure development [98a3b940].
Amid these developments, Morgan Stanley's Mike Wilson has labeled the AI theme as 'overcooked,' indicating that the market's expectations for AI-driven growth may not align with reality. Meanwhile, Bank of America advises against buying the tech dip, suggesting that the current enthusiasm for AI may be overblown [dd0235e1].
Overall, as analysts caution against the allure of AI stocks, the focus is shifting towards more stable and defensive investment options that may offer better protection in a volatile economic landscape, while also recognizing the potential of power equipment ETFs fueled by AI demand.