Artificial intelligence infrastructure is expected to remain the biggest driver of corporate profits in the second quarter, with Wells Fargo forecasting 22% year-over-year earnings growth for the S&P 500.
The bank expects S&P 500 earnings per share to accelerate from 19% growth in the first quarter to 22% in the second quarter. Wells Fargo said companies tied to AI infrastructure, including semiconductor makers, technology hardware firms, capital equipment suppliers, and utilities, are likely to contribute more than half of the index's overall earnings growth.
Wells Fargo also pointed to a widening gap between large cloud computing companies and the broader market. The firm said hyperscalers continue to prioritize heavy spending on artificial intelligence infrastructure even as some investors seek faster returns on those investments.
The research note added that elevated capital expenditures without an immediate payoff have weighed on sentiment toward several large technology companies.
Wells Fargo suggested that increasing shareholder returns through larger share repurchases or dividends, while maintaining disciplined AI investment, could help improve investor confidence.