The latest market outlook highlights the outsized influence of AI on economic growth, with estimates suggesting that roughly 43% of Q2’s 3% GDP growth came from AI-related activity. The so-called “Magnificent Seven” — expanded here to include AVGO for its AI exposure — now make up about 37% of the S&P 500’s weight, mirroring their GDP contribution. However, data center expansion faces a key bottleneck: the energy needed to power them. The report draws parallels to the 1990s tech bubble, likening NVDA’s current role in AI infrastructure to CSCO’s in the dot-com era. While Q2 results for these leading companies were strong — with 24% revenue growth and 31% earnings growth — valuations are steep at 32x forward earnings, well above the broader market. PVG sees near-term upside as limited for the top-tier names, noting that second-tier players like MRVL could present more attractive growth opportunities.

Sector performance showed strong gains for technology, communication services, and industrials year-to-date, while consumer discretionary and energy lagged. Gold continues to shine, up nearly 30% in 2025, while the U.S. dollar remains weaker, down 6.76% year-to-date. Bond markets were mixed, with long-term Treasuries flat and the aggregate bond index modestly positive. Interest rates remain elevated, with the Fed funds rate at 4.33% and the 10-year yield at 4.23%. Upcoming economic data releases — including CPI, PPI, and retail sales — will be closely watched for signs of inflationary pressure and consumer resilience. PVG maintains that the broader market could become more competitive in 2026 as S&P 500 earnings growth is projected to accelerate from 10% in 2025 to 13% in 2026.

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