Bank of America has lifted its 12-month price target for the S&P 500 (SPX) index to 7,200, implying a “solidly average” return of 8%.
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The bank notes that improving operating leverage and lower wage inflation could boost corporate profits, while other sectors beyond tech could benefit from lower interest rates and the “AI train.” At the same time, it warned that megacap stocks have been spending heavily on AI, and a failure or delay in monetization could lead to “capital raising and derating.”
Deutsche Bank Issues Warning on Economy
Deutsche Bank has a similar opinion on what would happen if AI spending disappoints, warning that the economy has been spared from a recession because heavy investment in AI has propped up growth and business sentiment.
“AI machines—in quite a literal sense—appear to be saving the U.S. economy right now,” wrote Deutsche Bank’s George Saravelos in a note to clients. “In the absence of tech-related spending, the U.S. would be close to, or in, recession this year.”
Deutsche Bank added that AI is still an unproven industry and that AI investments must “remain parabolic” in order to support gross domestic product (GDP).
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