Multi-Asset Perspectives: AI’s Rising Fuel Bill
Home

Multi-Asset Perspectives: AI’s Rising Fuel Bill

 Time to read: Minutes
Barbara Reinhard

Barbara Reinhard, CFA

CIO, Multi-Asset Strategies and Solutions

Energy Fuel Spiral

The engine driving markets is getting more expensive to run, putting more pressure on AI-driven earnings to deliver.

Artificial intelligence (AI) has become one of the main engines behind market returns, driving demand for chips, data centers, power, software, infrastructure, and capital. Every engine requires fuel, and financing costs have increased. Higher rates, energy demand, and competition for labor are making it more expensive for AI companies to borrow. 

Markets are already giving AI a lot of credit. The next test is whether companies can turn all that spending into enough revenue, profit, and cash flow to justify the cost. 

With expectations high and capital more expensive, investors need proof that AI spending can turn into revenue, profit, and cash flow. Self-funded growth, more than one source of earnings, and high-quality income matter more when borrowing costs are higher and markets have already priced in a lot of good news.

Market Indicators

AI spending 

Still driving demand for chips, data centers, power, and software, but the spending now must show up in revenue, profit, and cash flow. 

Earnings breadth 

Large technology companies are still doing much of the work. Broader profit growth would make the market advance steadier. 

Treasury yields 

Higher yields improve income, but they also raise the return investors need from stocks, credit, and real estate. 

Labor and inflation 

Labor costs are not pushing up inflation; higher oil prices and tariffs are the main sticking points. 

Market breadth 

Narrow leadership can keep the index moving, but it leaves less room for disappointment if AI optimism fades.

 

Tags:
Market Outlook
IM6007943

Past performance does not guarantee future results. 

This market insight has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults, (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. Voya Investment Management accepts no liability whatsoever for any direct, indirect or consequential loss arising from or in connection with any use of, or reliance on, this insight, which does not have any regard to the particular needs of any person. Voya Investment Management takes no responsibility whatsoever for any use, reliance or reference by persons other than the intended recipient of this insight. Any prices referred to herein are indicative only and dependent upon market conditions. 

Past performance is not indicative of future results. Unless otherwise specified, investments are not bank deposits or other obligations of a bank, and the repayment of principal is not insured or guaranteed. They are subject to investment risks, including the possibility that the value of any investment (and income derived therefrom, if any) can increase, decrease or in some cases be entirely lost, and investors may not get back the amount originally invested. The contents of this insight have not been reviewed by any regulatory authority in the countries in which it is distributed. The opinions and views herein do not take into account your individual circumstances, objectives, or needs and are not intended to be recommendations of particular financial instruments or strategies to you. This insight does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You are advised to exercise caution in relation to any information in this document. If you are in doubt about any of the contents of this insight, you should seek independent professional advice. 

This material may not be reproduced in whole or in part, in any form whatsoever, without the prior written permission of Voya Investment Management.

Top