▲ Wall Street, United States
While the net profits of US-listed companies are projected to surge significantly in the third quarter, a substantial portion of this earnings growth is heavily concentrated in a small number of artificial intelligence (AI)-related large-cap stocks.
The Wall Street Journal (WSJ) reported on the 25th (local time), citing FactSet compilations and Dow Jones Market Data analysis, that the net profits of S&P 500 companies are forecasted to increase by 30% in the third quarter compared to the same period last year.
However, 34% of the total profit increase is estimated to come from just two companies: Nvidia and Micron.
Expanding the scope to the top 10 companies, including Broadcom and Meta, these firms account for roughly two-thirds of the total profit growth.
The top 10 companies also include major oil and gas giants such as ExxonMobil and Chevron, which benefited from rising oil prices driven by the US-Iran war.
The strong performance of Micron and Nvidia is underpinned by exceptionally strong demand for AI semiconductors, including memory chips.
Micron reported a quarterly net profit that skyrocketed more than tenfold year-over-year last month, and experts expect Nvidia's net profit to surge by 90% as well.
Strong corporate earnings have been a key factor supporting the stock market's upward trend despite various adverse factors, including the US-Iran war.
However, the AI-driven stock market rally reflects not only current earnings but also expectations that massive AI investments will translate into sustained future profits.
As a result, concerns have been raised that stock prices could fall if investment returns fail to meet these expectations.
Market expert Ed Yardeni metaphorically noted, "There is a concern that we might end up converting all these data centers into pickleball courts."
On the other hand, some perspective suggests that market pessimism is unwarranted based solely on profit concentration.
Even excluding the top 10 stocks, the earnings of the remaining S&P 500 companies are expected to increase by 10% compared to the previous year.
Chris Grisanti, chief market strategist at MAI Capital Management, assessed, "The star players are leading the team, but the rest of the players are also pulling their weight."
Additionally, assessments indicate that valuation pressures have eased compared to the beginning of the year, as stock prices have not surged excessively relative to profit growth.
While some view the recent stock market strength as comparable to the late-1990s dot-com bubble, Ray Adams, chief investment officer (CIO) at Raymond James, pointed out a key difference: dot-com companies back then were not generating earnings the way companies are today.
(Photo: AP, Yonhap News)
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