Wolfe Research interprets the recent turbulence in securities tied to artificial intelligence as a reset of investor expectations - not a signal of a new macroeconomic regime. In a client note, analyst Stephanie Roth laid out the firm’s view that market behavior is reflecting mixed messages on the AI thematic rather than an outright collapse in AI leadership.
Roth wrote that "markets are sending mixed signals on AI," pointing to sharply weaker sentiment in software stocks and lower bond yields even as the overall equity market continues to show resilience. Wolfe Research describes the pattern as sector leadership having "rotated rather than collapsed," and warns that the market’s repricing of AI risk "may have moved further than the current economic backdrop warrants."
The firm also emphasized that the longer-term corporate adoption curve for AI remains in its early stages. Based on Census Bureau survey data, usage among larger companies is "approaching 35%," a level the note treats as indicative of material runway rather than saturation.
Looking ahead, Wolfe Research expects economic growth to surprise to the upside and for bond yields to move higher in the coming months. The firm contends that rising yields would favor cyclical sectors initially, before AI-driven leadership reasserts itself.
Despite the recent relative weakness in parts of the market, Wolfe Research highlighted that hyperscalers have outperformed substantially since the launch of ChatGPT, rising 164% compared with a 78% gain for the S&P 500, while software stocks have trailed at 55%.
"Interestingly, hyperscalers are being penalized by investors for investing heavily in capex, while software stocks are being pressured by concerns that AI may ultimately prove too disruptive," Roth noted.
Wolfe Research argues that neither heavy capital spending by hyperscalers nor disruption risks for software represent a macroeconomic threat. The firm estimates domestic AI investment at roughly 1.8% of GDP in 2026, calling it "meaningful, but far from the primary driver of the economy."
Finally, Roth said the firm’s proprietary momentum indicator is beginning to turn higher, which Wolfe Research views as an early sign that economic momentum is improving and that the pattern of sector rotation could normalize with cyclical participation rising before a renewed phase of AI leadership.