The AI Boom, Valuations, New Opportunities and Risks: What’s Next for the Stock Markets?

What opportunities and risks are currently emerging for investors? Which regions and sectors could shape stock market performance in the second half of 2026? And how should portfolios be positioned amid geopolitical challenges, high volatility, and growth opportunities? We posed these questions to two asset management equity experts, who painted a fascinating picture of the current situation in global stock markets.

The Stock Market Caught Between a Rock and a Hard Place

As an investor, it’s not easy right now to make sense of the current situation in the financial markets: Normally, one would have expected the numerous geopolitical crises and the associated rise in oil prices to send the stock markets into a tailspin. But the exact opposite has happened: Despite the negative environment, stock indices have risen and are currently at or near all-time highs. How is this possible?

A Question of Earnings Growth

Tamás Menyhárt, fund manager of the ERSTE RESPONSIBLE STOCK GLOBAL, does not see any contradiction in this development, but admits that it can cause confusion. For greater clarity, he recommends taking a closer look at the background: “It’s not what it seems at first glance. The geopolitical crises have certainly had consequences and have not left the stock markets unscathed.” As a result, valuations of U.S. stocks have also fallen significantly since the beginning of the year, and the price-to-earnings ratio for the S&P 500 has dropped from 22 to 20, which has made investing in stocks attractive again.

However, he sees the much more important reason for the positive sentiment in the financial markets in the positive momentum of earnings growth: “Corporate earnings expectations have been rising steadily for a year and have even doubled recently,” explains Menyhárt. For many investors, he says, the key factor is how much growth they get for the price of a stock. “The price-earnings-growth ratio, which compares the stock price to expected earnings growth, is currently at its lowest level in decades and has made stock investments attractive,” the expert notes. He adds: “Investors are literally chasing earnings, the setup for stocks is really strong right now!”

The PEG ratio is at its lowest level in decades

Toward Greater Market Depth

Menyhárt also points out that even higher bond yields and stock market slumps, such as the recent plunge in semiconductor stocks, have failed to dampen the current stock market boom. This was primarily due to inflated market expectations and profit-taking, which led investors to immediately reallocate their capital and invest in other sectors and regions. “Europe, among others, has benefited from this,” Menyhárt notes. In general, he sees an unbroken trend toward market diversification, fueled by a large number of investors who want to spread their money as widely as possible.

Artificial Intelligence as a Driver in the Stock Markets

Christoph Vahs, fund manager of the ERSTE RESPONSIBLE STOCK AMERICA, cites another reason for the stock market rally: The expansion of artificial intelligence is leading to billions in investments in data centers, cloud infrastructure, and electrification, which is boosting technology stocks in particular, but also stocks in related infrastructure sectors.

Vahs believes that developments in the field of artificial intelligence are still in their infancy and expects them to drive growth for years to come. As an example, he cites numerous companies “that are giving up their retail business because their order books in the business-to-business segment are so full that they can barely keep up with fulfilling them.”

Bubble or a new era?

When asked whether artificial intelligence could follow a similar trajectory to the dot-com bubble of the late 1990s, Vahs points out significant differences from that time: “The valuations of some dot-com companies were extremely high back then, even though they weren’t generating any profits. As a result, numerous tech stocks plummeted starting in 2000.” In contrast, the major IT companies that are investing heavily in artificial intelligence today can actually afford these investments because they have sufficient capital reserves. One side effect of these massive investments, however, is that the profits of the “Magnificent 7”, which include Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, and Tesla, are suffering as a result, causing their stocks to underperform the rest of the tech market. All in all, the fund manager sees artificial intelligence as an opportunity that can bring about significant change. However, the rapid expansion of the necessary infrastructure is crucial.

A Hunger for Storage, Energy, and Manpower

The expected increase in electricity demand alone, required to power AI data centers – will give the energy sector a massive boost in the coming years. According to estimates, electricity consumption caused by data centers is expected to increase by 350% by 2030.

Power Requirements for Data Centers

At the same time, a massive demand for storage capacity is expected to continue, a demand that the industry is barely able to meet. The result is a significant increase in storage prices, which is increasingly being felt in all areas of daily life – from smartphones to computers.

Even though artificial intelligence will replace jobs in an increasing number of fields, Vahs also sees a countertrend: “In the U.S., we see that the jobs eliminated by artificial intelligence are more than offset by significantly more new jobs created in the skilled trades, real estate, and infrastructure sectors.” At least for now, therefore, one could speak of a small AI job boom.

In the long run, however, artificial intelligence could also wipe out entire industries, says Vahs, citing the software industry as an example – an industry that is already struggling – with the ever increasing capabilities of artificial intelligence. “With the right AI model, you no longer need graphics programs or web tools to edit an image or build a website,” says Vahs, offering a glimpse of what might be ahead.

Opportunities Beyond the Tech Giants

Anyone wondering about the sustainability of the investment boom in the field of artificial intelligence is directed by the two experts to other market sectors – such as financial stocks, healthcare, biotechnology, industry, and infrastructure. While these sectors also benefit in part from the AI trend, they are often valued more attractively compared to the technology sector.

Traditional value sectors such as energy and banking are receiving strong support at this stage, which is good for European stock indices. Tamas Menyhárt and Christoph Vahs attribute the boom in the banking sector – from which Europe is benefiting in particular – in part to the end of the negative interest rate environment, under which financial stocks had suffered for an entire decade. The current rise in interest rates, which is not accompanied by an increased risk of recession, is providing an additional boost.

Positive Outlook for the Second Half of 2026

When asked about their final assessment for the second half of 2026, the two fund managers are in broad agreement. Reasonable stock valuations combined with very solid corporate growth make them generally optimistic; however, they expect the extremely high earnings growth rate of the past two quarters to slow somewhat.

Risk factors stem primarily from geopolitics. Even though the markets have learned to cope with ongoing geopolitical volatility, oil prices and inflation concerns could still quickly spill over into the stock markets from time to time.

Neither Menyhárt nor Vahs expect the U.S. midterm elections to have an impact on the financial markets. History has shown that the financial markets have always been able to cope with all kinds of majority configurations.

Tip: Stock funds as investment idea

If you don’t have the time or inclination to closely follow the stock markets and build your own portfolio, you can leave the selection of stocks to equity fund managers such as Tamás Menyhárt and Christoph Vahs. Investing in an equity fund allows for broad diversification – something that’s nearly impossible to achieve as an individual investor. This not only opens up a wide range of potential returns but also helps reduce risk.

You can find more information about the two equity funds mentioned here:

• ERSTE RESPONSIBLE STOCK GLOBAL
• ERSTE RESPONSIBLE STOCK AMERICA

 

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