- Investors have been worried about the AI trade in 2026, with disruption fears hammering tech.
- James Thorne of Wellington Altus thinks investors' fears are misplaced.
- He doesn't think Wall Street's rotation away from high-growth tech stocks is warranted.
Investors' AI fears are misplaced, according to a longtime market strategist, and worries about surging capex spending are an antiquated way of thinking about the next leg of the tech boom.
James Thorne, the chief market strategist at Wellington Altus, wrote on Thursday about why he thinks Wall Street is looking at the AI story wrong.
Thorne said that investors need to stop viewing AI through the lens of yesterday's economy. In his view, the US is mobilizing around AI in a way that's similar to how nations have historically mobilized around industries leading up to geopolitical conflict.
The problem Thorne sees with how Wall Street views the AI market is that it is based on the belief that high growth and spending are inherently inflationary. He criticized investors' recent tech selling and the market's rotation into other sectors.
"The dominant narrative still treats this as a tired, late-cycle burst fated to end in recession and a weaker dollar. That's why money is piling into utilities and staples at 50-times earnings while AI and software are being sold off indiscriminately."
Investors, he said, "are using valuation models from the wrong century for the wrong game."
Over the past few months, high AI capex has come under intense scrutiny, as investors have wondered if companies are overspending. But, according to Thorne, current capex levels aren't just justified, they are necessary for the US economy to remain competitive. Concerns about things like too much debt, for instance, should be reevaluated toward questions about what the debt is going toward.
"In theory, markets are supposed to price the future. In practice, they misprice regime shifts because they try to squeeze them back inside old templates," Thorne wrote.
The post 'Valuation models from the wrong century': A market strategist says Wall Street is getting AI all wrong appeared first on Business Insider
