S&P500 Profit Growth Expected to Accelerate... AI Investment Sustainability is the Key Variable

A forecast has emerged that the profit growth trend of the US S&P500 index will break past historical patterns and draw a steep upward curve. Whether the expansion of capital expenditure (CAPEX) by companies leading AI (Artificial Intelligence) investment can lead to actual growth in corporate profits is being cited as a key factor that will determine future market volatility.

On the 12th, Park Seok-hyeon, an equity strategist at Woori Bank, analyzed the AI investment cycle and the earnings outlook for the semiconductor sector through 'Morning Economy Plus'. Analyzing the net profit trends of the S&P500 index, Park explained that in the past, such as in 2018 or 2021, it was a common pattern for growth to stagnate in the year following a surge in profits. The analysis suggests that in 2018, the surge in IT stocks related to the Fourth Industrial Revolution drove profit growth, and in 2021, the effects of post-COVID policies and the benefits to untact industries drove it. However, he diagnosed that this cycle is different from the past in that profit growth is expected to continue from this year until 2028.

The process of resolving doubts about AI investment sustainability will determine stock price direction

In some parts of the market, doubts exist regarding rapid profit growth. The analysis is that concerns that profit growth will enter a stagnation phase again based on past patterns are acting as a factor of uncertainty. In particular, the recent sluggishness of some semiconductor stocks in the US market is interpreted as a result reflecting caution regarding the sustainability of AI investment, coupled with factors such as the performance of OpenAI.

Park analyzed, "The current market is in a process of removing uncertainty by confirming whether AI investment is sustainable." As it is confirmed whether the aggressive AI investment of hyperscalers (large-scale cloud companies) connects to actual corporate profits, the observation is that the profit growth of S&P500 companies could realize beyond concerns. Hyperscalers are the AI investment entities led by the top five companies, and their annual CAPEX expenditure trends are the key driver supporting overall profit growth.

However, he added that the possibility of the explosive stock price growth rate shown by semiconductor companies in the first half being maintained after the second half is low. This is because the expected rate of additional upward revisions in earnings entering the second half is becoming somewhat slower. Park stated, "The biggest point is whether the aggressive sustainability of AI investment and the resulting rapid growth in corporate performance can be realized," and predicted that as these processes are confirmed step-by-step, the overall upward trend in stock prices could continue based on profit growth.

AI investment fruits concentrating on the global semiconductor sector

The benefits of AI investment are not limited to specific countries or companies but are concentrating across the global semiconductor sector. According to the data presented by Park, the proportion of net profit accounted for by the semiconductor sector within the S&P500 index and the profit proportion of the Korean semiconductor sector are showing a pattern of rapid increase through 2024 and 2025. He explained that the proportion, which had shown a sideways trend since the mid-2010s, is rising steeply along with the industrialization of AI. In the case of Korea, checking the corresponding data on a quarterly basis also showed a trend similar to the US.

This trend is appearing commonly in both the US and Korean markets. As the expansion of AI investment concentrates on major core global semiconductor companies, Park's analysis is that focus should be placed on the 'AI investment fruits' enjoyed by the global semiconductor sector rather than the differentiation of returns by country.

Prospect of continued market leadership centered on semiconductors

In conclusion, there is a high possibility that the semiconductor sector will continue to hold the leadership of the future stock market. Park analyzed, "If the sector that enjoys the benefits of profit growth does not change, the possibility of the semiconductor sector's market leadership changing is low." He explained that the sustainability of AI investment and the resulting visibility of corporate performance growth will act as factors leading to gradual stock price increases.

Source: original video (YouTube)