T. Rowe Price global equity portfolio specialist Jennifer Martin has pointed out that global stock markets are currently at an important transition stage, with investors re-examining the pace of the AI cycle, the impact of the U.S. election, and investment opportunities beyond the technology sector.
Although AI fundamentals remain positive, market attention has shifted toward capital requirements, financing pressures, and growth sustainability, according to T. Rowe Price.
T. Rowe Price believes the U.S. election outcome may imply a more moderate pace of economic and policy change, with existing pressures such as tighter credit and intensifying competition for capital likely to persist. Should AI investment expansion and deregulation proceed too rapidly, the risk of market volatility would rise. A moderate slowdown in the pace of development would instead be conducive to a more balanced and sustainable landscape, potentially bringing a mild economic deceleration, declining inflation and real interest rates, and easing geopolitical tensions would raise the probability of this scenario.
While demand for computing infrastructure remains strong, investors are no longer simply chasing the scale of capital expenditure, instead examining growth sustainability, financing needs, and return on invested capital. This shift has amplified volatility in stocks that were early beneficiaries of AI infrastructure buildout.
T. Rowe Price maintains a positive assessment of AI's long-term potential. However, as capital investment rises, the growth trajectory shifts, and corporate reliance on external financing increases, stock selection becomes more difficult. The future winners will be companies capable of converting AI growth potential into stable earnings and substantial returns.
On the pace of capital expenditure, T. Rowe Price believes that investment demand in the AI sector remains enormous. Hyperscalers' capital expenditure in 2027 may exceed market expectations, with robust demand for CPUs, servers, and supporting infrastructure, while power supply and project approvals are current bottlenecks to expansion.
In the near term, a large number of planned infrastructure projects for 2026–2027 have already been approved or broken ground, making the capex outlook clear. However, political headwinds and slower approvals brought about by the election could weigh on new infrastructure projects starting from the second half of 2028.
At the same time, a large wave of new AI infrastructure capacity will come online in 2028, gradually easing supply tightness, with order demand expected to return to normal levels and potentially even triggering inventory adjustments, even as AI application deployment continues to advance.
T. Rowe Price cautions that during the evolution of the AI cycle, investors need to distinguish which demand is primarily driven by short-term supply tightness and which companies truly possess long-term endogenous growth capabilities.
Comments