AI investment case evolving from infrastructure spending to productivity and earnings growth as we enter H2, says John Wyn-Evans, Head of Market Analysis at Rathbones.
Looking ahead to the second half of the year, John Wyn-Evans, Head of Market Analysis, shares his insights.
The first half of 2026 has shown that markets can absorb a remarkable amount of bad news. Despite geopolitical tensions, inflation concerns and domestic political uncertainty, resilient economic growth and strong corporate earnings have kept investors focused on the bigger picture. The outlook for the second half will depend less on the headlines and more on whether those fundamentals continue to hold up.
Artificial intelligence remains central to that story, but the investment case is evolving. The first phase of the AI boom has rewarded the companies supplying the technology and materials to build the infrastructure – semiconductor manufacturers, chip designers energy suppliers.
The next phase will evolve into identifying the businesses that can use AI to boost productivity, improve services and deliver stronger earnings growth. Investors are becoming more interested in AI profits than AI spending. Even so, we retain a healthy exposure to hyperscaler capex recipients.
Geopolitics is the other key variable. Markets have taken comfort from signs of stabilisation in the Middle East and the recent decline in oil prices, but there is little room for complacency. Any renewed disruption to energy markets could quickly feed through to inflation expectations, interest-rate policy and investor sentiment.
For now, the backdrop remains supportive. Inflation pressures are showing signs of easing, earnings growth remains healthy and economic activity has proved more resilient than expected. That should create opportunities for investors, but after a strong first half we expect markets to become more selective, rewarding companies that can demonstrate genuine growth and tangible returns rather than simply exposure to the themes of the day.
