AI is changing the rules of the game in financial markets. Stock markets are breaking records

— The bond market differs from the stock market in that the former largely takes into account in its valuations the negative scenario of no agreement between the US and Iran and the permanent blockade of the Strait of Hormuz. If this worst-case scenario materializes, bond yields would likely rise further, but stocks would be hit particularly hard. As a rule, the bond market was the “smarter” market, although the recent reaction of investors on the debt market was largely distorted by the trauma after 2022. That is why we believe that this time the bond market is wrong, says Patryk Pyka, director of the analysis and investment advisory team at DI Xelion.

Alan Witczak, manager of the VIG/C-Quadrat TFI funds, points out that the relationship between bond yields and the prospects for the stock market has many nuances and the context is very important.

— Global investors often look at different asset classes relatively, i.e. in comparison to others. Given the risk of a lack of physical supplies of crude oil, high energy prices, and therefore increased inflation, there were a number of asset classes or stock market sectors that had worse prospects in such an environment. Technology companies, on the other hand, were relatively little affected by the situation on the oil market and had a buffer in the form of huge investment outlays on AI data centers, says the expert.

— Stock markets could focus on structural trends and not be depressed by cyclical topics, because the condition of the world economy itself has so far been surprisingly resistant to the turmoil in the Middle East. This was also confirmed by a very good season of quarterly results and clear and broad upward revisions of forecasts for company profits, even in Europe – says Tomasz Smolarek, investment advisor, asset manager at mTFI.

He emphasizes that the increases on the stock markets are not as extensive as it might seem, looking through the prism of index levels, often record levels. He adds that after the blocking of the Strait of Hormuz, stock exchange gains were dominated by industries exposed to large structural trends, i.e. sensitive to the current cyclical nature of economies.

— These were primarily companies related to the expansion of AI infrastructure, for which demand for this technology has been rapidly accelerating since the beginning of the year. The beneficiary of this was the US stock exchange, but also emerging markets. Due to the high share of Korea and Taiwan in the broad Emerging Markets index, i.e. the key beneficiaries of the AI ​​revolution, many other markets also benefited from passive inflows to broad funds from this region – explains the mTFI expert.

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— Overall, rising bond yields are not supportive of stock markets. However, now the negative impact of this factor on the stock market is mitigated by the ongoing AI revolution. The increase in work efficiency resulting from the implementation of AI in companies improves their margins, which translates into an increase in results – adds Dariusz Świniarski, fund manager at Eques Investment TFI.

He cites data: the dynamics of net profit per share of S&P 500 companies for the first quarter of 2026 was 27.6%. year on year, significantly beating expectations. — The unprecedented scale of investment expenditure by American companies is driving sales and profits of companies supplying equipment for the construction of data centers.. Investments in computer hardware and software accounted for 1.3 percentage points. from the overall GDP growth in the USA, which amounted to 1.6%. year to year – says Dariusz Świniarski.

AI drives investments and provides a safety cushion

Tomasz Bursa, vice-president of Opti TFI, also attaches great importance to trends related to AI. — In fact, the rise in treasury bond yields, as in 2022, did not support stocks. Now, however, a fundamental change is taking place: the development of AI not only increases productivity in the economy, but also contributes to an increase in investment. The development of AI is starting to be visible in other industries. It's not just semiconductors and chips, but the energy sector also benefits, because expanded data centers require energy, says the expert.

He admits that there are short-term concerns about the situation on the stock exchanges, but the key is that structurally – in his opinion – it promises to be a good time for the global economy, because investments have started.

— This is something that has been missing for a long time, the last revival in this area was seen from the beginning of the 1980s to the end of the 1990s and it resulted from globalization and the popularization of “PCs”. Perhaps investors are playing to reverse several years of stagnation in global investments, and if they were right, it would be very good for the markets, because it is structurally better for growth than relying on consumption. The investments are more durable and are expected to bring sufficiently high profitability. In such conditions, the level of interest rates, provided they were within a reasonable range, would not be so important for the economic situation on the stock exchanges and companies' demand for loans, says Tomasz Bursa.

He expects that if hopes for a rebound in investment materialize, investment lending would increase, as companies will also want to use debt to finance new projects that are expected to bring a sufficiently high return. This would probably mean the need to maintain slightly higher interest rates and may explain the current strength of banks' ratings.

Alan Witczak points out that – by estimating the amount of investment outlays of companies called hyperscalers (mainly AI/IT companies) in the coming years and taking into account the investment multiplier – we reach a situation in which one sector affects the growth of US GDP by approximately 1.5%. annually.

— This is a huge safety cushion for generating profits for companies benefiting from this scale of investments. Typically, the bond market is a refuge for investors in stressful situations. Currently, in an environment of rising inflation and bond yields, technology companies were, in a sense, a safe haven for global capital. In a situation where we have a chance to end the conflict, the probability of the boom spreading to other sectors increases – believes the manager of VIG/C-Quadrat TFI.

He adds that behavioral market analysis is equally important. — Recently, we have had situations where the more fear there is in the market, the more fuel there is to increase share prices, especially in sectors relatively resistant to macroeconomic turmoil. The same may be true the other way around: the more optimism and euphoria, the more careful you need to be, although of course not always, says Alan Witczak.

This is not a recessionary scenario. On the contrary

Tomasz Smolarek points out that while AI companies have been soaring in recent weeks, a large group of industries and companies unrelated to megatrends have been watching the recent increases from the sidelines. They have not been capital recipients due to the less clear current macro picture for the world.

— But there wasn't a tragedy there either, because the Strait of Hormuz is not expected to remain blocked forever. If this were the case, oil prices would be much higher and a recession would become the baseline scenariobecause on the horizon we would see oil reserves depleted to minimal levels, which for now are still absorbing the current shortages. And if the recession scenario were to play out, bond yields would not be where they are now, but much lower, says the mTFI manager.

This last sentence shows an apparent paradox: rising bond yields, as they are now, can herald good economic conditions. A recession would force central banks to respond by cutting interest rates to stimulate business activity.

— While it may seem that the bond and stock markets are playing out different scenarios, they are both playing out the same one: no global recession triggered by the current conflict in the Middle East. However, the bond market is more sensitive to the risk of higher inflation in the medium term, which the stock markets as a whole are less concerned about. Of course, as long as it is not inflation that threatens economic growth. And for now, it is a rather point-based, supply-side inflation that can be “repaired” relatively quickly by unblocking the Strait, and not broadly demand- and supply-driven at the same time, as it was after the pandemic – says the asset manager at mTFI.

Patryk Pyka points out that investors' optimism is justified by company results and the stable economic situation in the world. — We assume that the latest inflation impulse will not trigger the Fed's reaction in the form of interest rate increases. In our baseline scenario, inflation in the US will soon peak in the range of 4-4.2%. This is too little for FOMC members to decide to increase rates – remember that inflation will still remain close to the Fed rate (3.5-3.75%). We therefore have an arrangement in which companies will be able to improve their margins, which will be supported by the recent inflation impulse. At the same time, the Federal Reserve will not seek to tighten policy monetary policy in order to slow down economic expansion, because it is not the source of inflation – says the DI Xelion expert.

— Structurally, the upward trend on the US stock exchange is not threatened, I see no fundamental reasons for a breakdown in this trend. The price/earnings ratio of 21-22x is not very high, considering that the profits of American companies are growing and current forecasts assume a double-digit improvement in this area in 2026-2027. The current valuation ratios have nothing to do with the dot-com bubble, when the entire market was trading at a P/E ratio of 30x. The positive thing is that large investments in AI and related industries are not financed by debt and that there are no large M&A transactions, which is what we saw in the dot-com bubble, says Tomasz Bursa.

— However, “tactically” half a year of cooling down the mood on the stock exchange could be useful, I assume that some correction may occur by the end of the year, but probably no more than 10%. – adds the vice-president of Opti TFI.

Note: the information contained in the text is for informational purposes only and does not constitute an investment recommendation, information recommending or suggesting an investment strategy within the meaning of applicable regulations, or any other form of advice regarding the purchase or sale of financial products.

Author: Maciej Rudke, journalist of Business Insider Polska