S&P 500 ‘will advance in 2025.’ thanks to a new AI boost: Capital Economics By Investing.com
Investing.com — Capital Economics reiterated its view that it will “boom in 2025.” following Donald Trump’s announcement of the joint venture (JV) Stargate, which aims to invest $500 billion over four years in the development of AI infrastructure in the United States.
Key investors in the joint venture include SoftBank (TYO: ), which takes on financial responsibility, OpenAI, which oversees operations, as well as Oracle (NYSE: ) and MGX, Abu Dhabi’s AI-focused investment vehicle.
Trump’s support for what he called the “largest AI infrastructure project in history” is expected to lead to significant investment in data centers, chip manufacturing and power plants to strengthen the US AI ecosystem.
According to Capital Economics, Japan-based Softbank’s ( OTC: ) involvement in the initiative underscores Trump’s openness to foreign cooperation in America’s AI ambitions, provided the companies are from allied countries.
“The new president seems much less interested than his predecessor in imposing checks and balances on Al’s expansion,” the company notes.
Trump also rescinded several of Biden’s executive orders, including those aimed at AI and clean energy regulations, suggesting a less restrictive approach to the growth of the AI sector, even if it requires increased use of “dirty” energy.
Capital Economics’ bullish view on the S&P 500 is underpinned by the belief that the benefits of AI will materialize quickly within the index, even more gradually across the US economy. Trump’s pro-AI policies are seen as reinforcing this view, and the research firm stands by its forecast that the index will reach 7,000 by the end of 2025.
“We don’t see many signs that demand for Alom is falling, which is perhaps the biggest risk to our view. Indeed, plans to increase investment in Al suggest otherwise,” it continued.
“An oft-repeated argument is that some big tech companies, which have been at the center of the Al revolution and investment boom, are ‘valued for perfection’, given the speeds and amounts at which analysts expect their earnings to grow . However, they have largely exceeded expectations for EPS growth so far.”
Despite acknowledging potential risks such as economic downturns, rising bond yields, antitrust regulations and geopolitical tensions, Capital Economics does not foresee these factors derailing the S&P 500’s gains this year.
The company also predicts a significant market correction in 2026, but does not expect this to signal the end of AI’s influence.
