Global equity markets saw a deep selloff this week as skepticism grew around viability of AI trade amid mounting debt concerns, pressuring chipmaking stocks. Jefferies in its latest Greed and Fear note warned that global AI stocks’ earnings growth is expected to slow sharply in next two years, urging investors to look beyond the AI trade for opportunities.
In a report titled Diversifying Beyond AI, Jefferies said consensus earnings growth for AI-related stocks in the MSCI AC World Index is projected to go from around 100 percent in 2026 to 30 percent in 2027 and moderate further to 22 percent in 2028. The slowdown comes after a strong run in AI-linked stocks, raising questions about whether their earnings growth can continue to justify elevated valuations.
“It has become time to diversify beyond AI,” said Jefferies’ Global Head of Quantitative Strategy Desh Peramunetilleke in the report, making the case for investors to broaden their exposure beyond the technology theme.
Valuations are another reason investors could consider diversifying beyond AI, the Jefferies report said.
Global AI stocks trade at 23 times forward price-to-earnings (PE) on an equal-weighted basis, compared with 13 times for stocks outside AI, according to the report. This means investors are paying a significantly higher multiple for AI-linked companies, even as their earnings growth is expected to cool over the next two years.