A sell-off in U.S. stocks is continuing for a second consecutive day. Another batch of disappointing earnings reports from major technology companies (Amazon and Intel reported results the previous day) has heightened investor concerns about the returns on massive investments in artificial intelligence, Bloomberg writes. Against this backdrop, Nasdaq 100 futures plunged 2.6% in premarket trading on October 30, while S&P 500 futures fell 1%. Nevertheless, despite the sell-off, half of the professional investors and asset managers who took part in Barron’s fall Big Money survey remain optimistic and describe themselves as “bulls” on the outlook for U.S. stocks over the next 12 months.
Barron’s conducts its Big Money survey of professional investors twice a year, with the assistance of Erdos Media Research, based in Ramsey, New Jersey. The fall survey was conducted from September 23 to October 15 and included 81 managers.
Details
“Bulls,” the survey found, are optimistic about the outlook for the S&P 500 and Nasdaq Composite indexes: they forecast gains of 8% and 13%, respectively, by the end of next year. Optimists expect the S&P 500 to finish 2027 at 8,366 points and the Nasdaq at 29,527 points. According to their average forecasts, the Dow Jones Industrial Average will gain another 9% by the end of 2027.
However, this fall, the ranks of managers optimistic about stocks have thinned: they made up 54% in the spring, but now account for 50%, Barron’s notes. The “bears” camp has grown and now stands at 24%, compared with 17% in April. About 26% of managers describe their outlook for the market as neutral. 40% of those surveyed consider the market overvalued, while 10% consider it undervalued; these figures are roughly in line with the results of the spring survey.
31% of respondents consider information technology the most attractive sector in the stock market over the next 12 months, followed by healthcare at 26%. At the same time, 22% of those surveyed consider IT the least attractive sector.
37% of survey participants are confident that current corporate spending on artificial intelligence infrastructure will pay off within the next two years. Another 32% expect the opposite, while the rest believe it is too early to draw conclusions.
Almost half of the managers who took part in the survey expect U.S. stocks to outperform other markets over the next 12 months. Nevertheless, 71% say they are optimistic about non-U.S. stocks, and 38% plan to increase the share of foreign securities in their portfolios next year. About a quarter of respondents believe emerging markets will deliver the best results in the coming year.
What else you need to know about the survey
Barron’s fall survey found that only 51% of respondents have outperformed the S&P 500 this year in terms of investment returns, both in their personal investments and in their professional work. This points to the challenges posed by the market’s concentration in the technology sector and the shifting macroeconomic backdrop, the publication notes. It may also explain the divergence in sentiment among participants in the latest Big Money survey.
What the optimists say
“The capital spending cycle for artificial intelligence will continue into 2027. That’s being underestimated. During the dot-com bubble of the late 1990s, spending lasted eight years. And it’s been only four years since ChatGPT launched. Investors need to put money where there is earnings growth, high profitability, and opportunity,” says Michael Arone, chief investment strategist at State Street Global Advisors.
Harris Nydick, co-managing partner of CFS Investment Advisory Services, shares this view. In his words, the stock market is “still in the very early stages” of the artificial intelligence boom, and the S&P 500 could climb to 9,000 points before the market cycle turns.
“Expectations are high, and too many investors have piled into technology stocks, but AI adoption is still at a very early stage,” says Parnassus Investments portfolio manager Lori Keith, who is betting on the technology sector.
AI will “dazzle over the next decade,” says David Hartzell, president and CEO of Cornell Capital Management. The main challenge, he says, is identifying the long-term leaders—that is, “individual stocks that will still be around in 10 years.” He is betting on the Vanguard S&P 500 exchange-traded fund (ETF). “When you buy it, you get all the good stocks, and the bad ones eventually drop out of the index. It’s the best way to play the technology boom,” he says.
Much of the case for growth in U.S. stocks rests on the outlook for corporate earnings. Forecasts for earnings have rarely—if ever—been so rosy, and technology spending deserves much of the credit, Barron’s notes.
What the skeptics say
Bill Smead, chief investment officer of Smead Capital Management, is bearish and considers stocks overvalued. In his view, too much of the U.S. market depends on bets on artificial intelligence. “All this capital is crowded into one sector. That creates risk for the economy and the markets,” Smead says.
Amy Robinson, CEO of Robinson Value Management, who has a neutral stance on stocks, also sees risks in companies’ AI-related strategies and their shares. She considers Nvidia the most overvalued stock on the market: in her view, the company’s investments in its own customers resemble the circular financing of the dot-com era. Nvidia has helped many customers finance purchases of its chips, which are essential for AI computing, or acted as a guarantor on their loans.
“One of the main problems is that when U.S. Treasury yields, interest rates, and oil prices rise, the dollar also strengthens. That’s far from an ideal setup for emerging markets,” says Louis Lau, chief investment officer at Brandes Investment Partners and co-manager of the Brandes Emerging Markets Value fund.
What else are investors focused on?
The higher cost of capital, as well as the sustainability and durability of the “artificial intelligence trade,” are top of mind for many survey participants. 27% of respondents cite a potential slowdown in AI as the biggest risk the market could face over the next six months. The same percentage identify rising interest rates as their main concern, while 17% point to rising Treasury yields.ㅤ
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