Market Perspective

What AI’s next act might look like

The BFM Investment Team · July 2026

Each year, LPL Research publishes a midyear outlook — a considered look at where the economy and markets may be headed over the second half. The 2026 edition covers the ground you would expect, with forecasts for economic growth, corporate earnings, and interest rates. What sets this one apart is its focus on four themes the team believes will shape markets into year-end. We want to spend a moment on one of them, because it touches nearly every portfolio we manage: the next act for artificial intelligence.

The story is starting to change

Artificial intelligence has been the single biggest force in the stock market for two years, and it is likely to remain important through the rest of 2026. But the conversation around it is shifting. For most of that run, investors rewarded companies simply for spending heavily on AI and for the fast profit growth that spending produced. The question now is becoming more demanding: which companies will actually earn a good return on all that money — and how much?

The sums involved are hard to overstate. Five of the largest technology companies — Alphabet, Amazon, Meta, Microsoft, and Oracle — are on track to spend more than $750 billion this year on the data centers, chips, and computing power that AI runs on. That figure could pass $1 trillion in 2027. This building boom has driven exceptional profit growth, particularly for technology companies and for the semiconductor firms that make the specialized chips AI depends on.

And in an important sense, it is still early. Most businesses have only begun to put these tools to work. If AI delivers even part of the efficiency gains its supporters expect as it spreads across industries, much of the benefit still lies ahead.

Some investors worry the spending is close to a peak. For now, the evidence points the other way. The largest builders keep raising their plans, and real-world limits — how quickly data centers can be built, whether there is enough electricity to power them, the supply of specialized parts, and the pace of regulation — may stretch this investment cycle out longer rather than bring it to an end.

From spending to results

As the boom matures, attention is turning to a simple question: is it paying off? Share prices and analysts’ forecasts already assume that AI will make companies more efficient and more profitable. That raises the bar. Investors will increasingly want to see the proof — higher revenue, lower costs, and stronger profits — rather than take it on faith. Some of the money being spent will inevitably be wasted. But the opportunity remains substantial for the companies that genuinely turn these tools into results.

The next few earnings seasons should tell us more, particularly as companies outside of technology begin to describe, in concrete terms, how AI is improving the way they operate.

The benefits should spread beyond technology

So far, AI has mostly rewarded technology and chip companies. As its use widens, the advantages should reach further. Industrial companies, for example, may prove notable winners, using AI to run their factories, logistics, and supply chains more efficiently — and to protect their profits in the process. At the same time, some software companies could find themselves under pressure, as the AI features they once sold for a premium become standard and widely available.

How we are approaching it

Our job is not to guess which single company wins the AI race. It is to make sure your portfolio is positioned to benefit from a genuine, long-term change in the economy without depending on any one name to keep rising. That means staying diversified, watching closely what we are asked to pay for a company’s future profits, and keeping a level head to tell durable progress apart from passing enthusiasm. AI is real and important. So is the discipline of not overpaying for it.

The bottom line

AI is entering a new phase. The market is moving from paying for promise to paying for performance. This is not the end of the AI story — it is a more selective chapter, one in which companies that show real, measurable returns are rewarded, while those that cannot deliver face greater pressure and sharper swings in their share prices. The recent turbulence in semiconductor stocks suggests that shift is already underway. For investors, the useful question is changing too: less about who is spending the most, and more about who is earning the most from what they spend.

This commentary draws on LPL Research’s Midyear Outlook 2026. For informational purposes only; not investment advice or a recommendation to buy or sell any security. Company names are referenced for illustration only and are not recommendations. Estimates and forecasts may not develop as predicted and are subject to change.