Could the AI buildout be entering a new phase, and if it is, what does that mean for the stock market?
Fourth Consecutive Year of Gains: What LPL Research’s Mid-Year Outlook Says About the S&P 500
LPL Research just released its Mid-year Outlook for 2026, and they are bullish on the stock market for the remainder of the year. But the title of the report — Policy, Buildouts, and Bottlenecks — hints at the cautions investors should have moving forward.
As we record this, the S&P 500 Index is up more than 8% year-to-date. If 2026 ends in the green, it would be the 4th straight year of positive returns. That would not be that unusual. According to LPL, market expansions that make it to year 4 usually generate strong gains that year. In fact, the last negative 4th year for the S&P 500 came during the first bull market after WWII, more than 70 years ago, and five out of the last seven periods of stock market appreciation have experienced double-digit gains in the fourth year.
Artificial Intelligence and the Stock Market: Timing, Not “If”
Having said that, the direction of the stock market moving forward will be tied to Artificial Intelligence. It’s really not about IF AI will be implemented, but when.
Dot-Com Boom and Bust Lessons: Brian Westbury on Being Early, Not Wrong
I’m reminded of commentary from First Trust Chief Economist Brian Westbury. When talking about the Dot-com boom and bust, he said investors were actually right, they were just early. In other words, they sunk their dollars into companies that were not yet profitable. Some never made it. For others, it took time.
Much of the AI trade has been driven by the promise of the future, and the growth potential of the companies involved.
AI Hyperscaler Spending: Oracle, Alphabet, Amazon, Meta, and Microsoft’s $750 Billion Infrastructure Investment
Take a look at this chart showing the 5 companies known as the AI hyperscalers.
This shows the combined spending over the past 6 years, and forecasted spending for next year expected from Oracle, Alphabet, Amazon, Meta, and Microsoft. These five companies are on track to invest more than $750 billion in AI infrastructure this year, and may spend more than $1 trillion in 2027. The earnings growth driven by their investment has been historic. The technology sector grew profits by 54% during the first quarter.
Hyperscaler Bond Issuance: From $110 Billion to a Projected $300 Billion in Debt Financing
But as these companies continue to spend, they are no longer able to do it from huge cash reserves. Take a look at this chart.
This shows that the same five companies issued roughly $110 billion of bonds in 2025. Estimates point toward $300 billion in 2026. LPL points out building data centers, securing chips, and powering them requires sums beyond even their formidable cash flows. That’s not necessarily a bad thing. The borrowing companies are still in excellent financial shape. But it does point out the next phase of the AI buildout will be different.
From Spending to Monetization: The Next Act of the AI Buildout
And investors may no longer buy on optimism, but expect results. As LPL puts it, AI’s first act is spending, and it’s still going. The next act will be monetization.
Securities are offered through LPL Financial, Member FINRA/SIPC. GenWealth Financial Advisors is an other business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance, LLC, a registered investment adviser. Independent Advisor Alliance, LLC is a separate entity from LPL Financial.
