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Investing.com – Capital Economics reiterated its view that “it will be successful by 2025” after the announcement of Donald Trump’s Stargate joint venture (JV), which intends to invest $ 500 billion over four years to develop the infrastructure of AI in the United States.
Key investors in the JV include SoftBank (TYO:), taking financial responsibility, OpenAI, overseeing operations, as well as Oracle (NYSE:) and MGX, an Abu Dhabi-based AI-focused investment vehicle.
Trump’s support for what he called “the largest AI project in history” is expected to lead to large investments in data centers, chip manufacturing, and power plants to strengthen the US AI ecosystem.
According to Capital Economics, the participation of Japan-based Softbank (OTC:) in this project underscores Trump’s openness to partnering with other countries in American AI projects, as long as the firms are from affiliated nations.
“The new president appears to be less enthusiastic than his predecessor about putting checks and balances on Al’s rollout,” the firm said.
Trump has also rolled back several of Biden’s executive orders, including those focused on AI development and clean energy regulations, which show a slow growth trajectory for the AI sector, even though it requires ts increased use of “dirty” energy.
Capital Economics’ bullish outlook on the S&P 500 is underpinned by the belief that the benefits of AI will be felt quickly in the index, albeit slowly in the broader US economy. Trump’s pro-AI policies are seen as strengthening this view, and the research firm stands by its prediction that the index will reach 7,000 by the end of 2025.
“We don’t see many signs of demand for Al faltering, which is probably the biggest risk in our view. Of course, plans to increase investment in Al suggest otherwise,” it continues.
An often-repeated argument is that some Big Tech firms, which have been at the center of the Al revolution and investing boom, are ‘the price of perfection’, based on their speed, and the numbers, which analysts expect their earnings to grow. grow up. . However, so far, they have generally exceeded EPS growth expectations. ”
While acknowledging potential risks such as recession, rising bond yields, antitrust regulations, and political tensions, Capital Economics does not expect these factors to disrupt the S&P 500’s rally this year.
The firm also predicts a significant market correction in 2026 but does not expect this to signal the end of AI’s influence.
