AI hype has subsided How long can the AI wave continue to boost the US stock market?

Until two or three weeks ago, the optimists dominated the stock markets, primarily in the US. The hype surrounding AI as well as the foreseeable fall in interest rates and the associated economic hopes provided the fuel for the rally in recent months. But how long will the optimism last?

Clouds are gathering on the horizon. A second term in office for Donald Trump as US President is considered highly likely. Fears of new trade conflicts are spreading. The AI momentum has also slowed somewhat recently - investors are wondering how much further the trees can grow into the sky here.

Who will be president of the USA?

The question of whether the White House will remain in Democratic hands after Joe Biden's withdrawal thanks to the new candidate Kamala Harris or whether Trump will take the reins again after the assassination attempt on him will be decided this November. "From the perspective of the financial markets, the latest developments initially 'only' mean a certain amount of uncertainty," comments Sören Hettler, Head of Investment Strategy and Private Clients at DZ Bank.

For the time being, investors are watching with bated breath as tech giants Nvidia, Apple and Microsoft vie for the title of the world's most valuable company in the USA - driven by the expectation that AI applications will make the cash registers ring strongly.

Apple triumphApple is once again crowned the world's most valuable company thanks to its AI strategy

AI wave slowly losing steam

However, the AI wave, which had sent many tech stocks soaring, has recently lost some of its euphoria. One reason: in view of the increased chances of a Trump administration, major investors are increasingly focusing on more traditional industries, to the detriment of the technology sector.

The share price of the highly praised AI chip manufacturer Nvidia has now fallen a good 15 percent from its high in mid-June. Most recently, Google's parent company Alphabet came under pressure on the market and Tesla plummeted after yet more disappointing quarterly figures. Overall, Wall Street, which sets the tone worldwide, is showing signs of fatigue.

Economist sees air getting thinner

Edgar Walk, chief economist at Metzler Asset Management, believes the air is getting thinner. "It is likely to become increasingly difficult for companies to meet the high expectations", also because the global economy is only growing moderately. Investors have high expectations when it comes to AI in particular - many companies are already earning good money with this topic, but quite a few have yet to prove it.

With a view to the US presidential election on November 5, 2024, Felix Herrmann, Chief Economist at Aramea Asset Management, points out: "Contrary to popular stock market wisdom, the political markets could have longer legs." This is because a mood of optimism is unlikely to be generated regardless of who wins the election. Instead, there is a risk of an even greater division in US society.

Michael Heise, chief economist at asset manager HQ Trust, is also cautious: "A Trump victory will at best bring a brief phase of economic recovery through tax cuts and deregulation. In the long term, however, the negative consequences for the global economy could be considerable. Europe would then be challenged by increased protectionism and a questioning of the rule-based order.

However, the majority situation in the US Congress after the election would also be important, says economist Alexander Buhrow from DZ Bank. After all, these will determine the scope of action of the presidential winner. The latter will therefore very likely have to make considerable compromises. "Only a clear Republican victory in the congressional elections would allow Trump to implement some points of his agenda."