Wall Street’s AI Boom Has Powered Stocks For Years. Now Investors Want Proof Before Pouring More Money.

The US stock market enters the second half of 2026 after a strong first six months, with investors now turning their attention from the rapid pace of artificial intelligence investment to whether companies can translate those billions of dollars into earnings growth.

The benchmark S&P 500 has risen more than 8% this year, while the technology-heavy Nasdaq Composite has gained roughly 11%, extending a rally that has largely been driven by AI-related companies. Both indexes, however, pulled back during June as investors reassessed valuations and looked ahead to the next earnings season, Reuters reported.

Artificial intelligence remains the biggest force behind Wall Street’s momentum.

The world’s largest technology companies, including Microsoft, Alphabet, Amazon, Meta Platforms and Oracle, are expected to spend a combined about $730 billion on capital expenditures in 2026, according to JPMorgan Research. The investment has fueled demand across semiconductor manufacturers, data center developers, utilities and industrial companies supporting the AI infrastructure buildout.

“The level of capex that we’re seeing will continue for the foreseeable future is certainly priced into the market,” Nicolas Janvier, head of North American equities at Columbia Threadneedle Investments, told Reuters.

That spending has also raised expectations.

Rather than asking whether companies will continue investing in AI, investors are increasingly focused on whether those investments will generate meaningful financial returns. Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions, told the news agency that many AI-related trades have become heavily crowded, making markets more vulnerable if confidence in the investment story begins to weaken.

Attention is now turning to corporate earnings, which many analysts view as the next major test for the market.

S&P 500 companies are expected to deliver earnings growth of more than 26% in 2026, according to LSEG IBES estimates. Every sector in the index is projected to post year-over-year earnings growth, reflecting continued consumer spending alongside robust technology investment.

“The main question is delivery of the earnings that are expected out of the S&P 500, but also the tech sector,” David Bianco, Americas chief investment officer at DWS, told Reuters. “That’s one of those things that there can’t be any excuses.”

Markets are also contending with broader global developments.

Russia’s war in Ukraine continues to influence energy and commodity markets, while instability in the Middle East has periodically driven oil price volatility despite the recent easing in crude prices following the Israel-Iran ceasefire. Those developments have remained closely tied to inflation expectations and monetary policy, with investors watching how geopolitical risks feed into broader economic conditions.

Interest rates remain another major focus following the arrival of Kevin Warsh as chairman of the Federal Reserve.

Warsh’s first policy meeting surprised many investors after signaling a more hawkish approach toward inflation than markets had expected. Treasury yields have remained sensitive to the Fed’s messaging, with higher yields increasing borrowing costs and affecting stock valuations.

“Valuations, I think, are justifiable,” Noah Weisberger, chief US equity strategist at BCA Research, told the news agency. “But that doesn’t mean the market’s not vulnerable to a re-rating of interest rates.”

Wall Street is also preparing for a busy period for new listings.

Following the public debut of SpaceX, investors are watching expected initial public offerings from artificial intelligence companies including Anthropic and OpenAI. Analysts say the pipeline will test investor demand and the market’s ability to absorb significant new equity issuance while maintaining current valuations.

“It’s this test of risk appetite and liquidity, just how much dry powder is out there,” Bianco told Reuters.

Politics could also play a larger role in market sentiment during the months ahead.

Historical data compiled by CFRA Research show that US midterm election years have typically recorded the deepest intra-year declines of the four-year presidential cycle, with the third quarter historically producing weaker average returns than other periods.