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DOLL SEES RISKS BUILDING BENEATH THE AI TRADE

Bob Doll, chief investment officer at Crossmark Global Investments, believes years of dovish policymaking have helped fuel a series of investment bubbles. Today, he says, the AI trade is at center stage, and semiconductor stocks have been among its biggest beneficiaries.

According to Doll, investors have taken a selective approach to AI. The market has punished many of the Mag 7 MAGS.K for their heavy spending on AI infrastructure, while rewarding the companies benefiting from that spending, particularly semiconductor and technology hardware firms—at least until recently.

In his latest Deliberations note, Doll warns that this dynamic may not be sustainable. Given the growing funding needs of hyperscalers, he argues that investors should be cautious about assuming these companies will keep aggressively increasing capex if AI monetization fails to accelerate.

If concerns about AI overspending persist, speculation about a slowdown in hyperscaler spending is likely to grow. That, in turn, could keep volatility elevated in the crowded semiconductor and technology trades. Meanwhile, other parts of the market, including financials and healthcare, have benefited as investors look beyond the AI theme.

Doll's broader outlook remains constructive. While geopolitical tensions—particularly those tied to energy supplies and shipping routes through the Strait of Hormuz—continue to weigh on the global economy, he does not believe they are severe enough to derail the expansion. Instead, resilient economic growth, accommodative global monetary conditions and steadily rising corporate earnings continue to support risk assets.

His conclusion: the long-term investment cycle remains intact, even as some of the market's recent high-flyers begin to show signs of strain. In Doll's view, it may take meaningfully higher bond yields before the investment cycle finally runs its course.

(Terence Gabriel)

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