Investment bank Evercore ISI: AI is transforming the S&P 500 into a "market of individual stocks"

格隆汇 June 2｜Renowned US investment bank Evercore ISI has issued a fresh warning, stating that the S&P 500 Index is gradually transforming into a market characterized by the prominence of individual stocks, rather than simply a stock market. Artificial Intelligence (AI) trading has not only pushed up US stocks but has also led to high concentration, while masking a broader and more challenging backdrop. The team of analysts led by the bank's Chief Equity and Quantitative Strategist, Julian Emanuel, believes that the strong performance of a few tech stocks has, on one hand, driven the rise of the S&P 500 Index, and on the other hand, offset more challenging factors such as weak consumer confidence, high oil prices, and persistent inflation. US core Personal Consumption Expenditure (PCE) in April increased by 3.3% year-on-year, reaching the highest level since 2023. The report highlights that AI-driven earnings growth is increasingly affecting the movement of the S&P 500 Index, as a handful of tech stocks continue to exert outsized influence over the benchmark index. Emanuel emphasized that just three companies—Micron, Nvidia, and Alphabet—have contributed more than 40% of the S&P 500 Index's earnings forecast upgrades for 2026 this year. These companies also achieved some of the most remarkable earnings results during the recent reporting season. The top 10 stocks in the index now account for nearly 40% of its total weighting, a historical high. Evercore maintains its year-end target for the S&P 500 Index at 7,750 points, with a “bull market scenario” forecast of 9,000 points. The bank believes that whether the index can continue to rise to its year-end target of 7,750 points mainly depends on the sustained growth in demand for AI and ongoing earnings growth.