Rudi’s View: AI To The Rescue

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In today's edition:

• AI To The Rescue
• All-Weather Or Not?
• RBC Likes Zip Co

By Rudi Filapek-Vandyck, Editor

AI To The Rescue

Equities are climbing the proverbial wall of worries in 2026 and AI is one key factor helping them to do so.

With uncertainty remaining as to what exactly is the situation in the Middle East –see also: Schroedinger’s Strait– and inflation stubborn while central banks are expected to tighten, there’s plenty to worry about for investors.

Did anyone mention parabolic share price moves in selected winners?

All in all, this year’s playbook very much reads like AI To The Rescue, authored by many a market strategist. ANZ Bank‘s freshly released update on Asia very much resembles that thesis and sentiment.

Think of it in terms of your traditional economist set-up: on the one hand there are lots of risks and headwinds at work, including further upside for inflation even if the Strait of Hormuz opens tomorrow, but the other hand holds an AI supercycle that is powerful enough to overwhelm the negatives.

ANZ Bank has upgraded its 2026 GDP forecast for the region to 5% from 4.8% prior. Taiwan, South Korea, Singapore and Malaysia have been identified as this year’s standout economies; all are major beneficiaries from exposure to semiconductors (chips) and AI.

BCA Lauds Strong Earnings Momentum

ANZ Bank’s confidence was mirrored during BCA Research Chief US Equity Strategist, Noah Weisberger‘s online presentation to investors in Asia on Thursday morning Australian time.

Weisberger’s view is earnings growth for American companies is currently so strong –with Q1 results handsomely beating his own and broad market expectations– that it will take quite a big setback to stop the current uptrend into year-end.

A little bit of extra inflation or unexpected delays in the USA-Iran negotiations might temporarily trigger pullbacks, but strong earnings support should prevail.

He has history on his side.

BCA Research has now lifted its year-end target for the S&P500 to 8100, i.e. circa 10% more upside on top of gains already achieved year-to-date.

Among the question marks noted is how investors will treat hyperscalers now they are spending all their cash flows on AI capex. As Weisberger explained, this oversized spending weighs on these companies’ return on equity (ROE), which may or may not lead to de-rated multiples.

As long as revenue growth remains strong and margins are holding up, Weisberger doesn’t seem too worried.

Besides, he pointed out, the rest of US Tech is still generating more cash than goes into capex. Apart from Technology, two other sectors remain firmly in strong earnings growth upgrade mode: Materials and Industrials.

All three sectors are overweighted in BCA’s model portfolio.

Giant IPOs in 2026

BCA Research has analysed no fewer than 12,000 IPOs in the US, allowing Weisberger to address some investor myths and misconceptions on this matter.

Straight up: three-quarters of all IPOs have disappeared over time. When measured by median share price performance, IPOs generate a net negative return over 30 days, one year and three years after listing.

Historical research also shows a close correlation between positive market sentiment –measured by high P/E multiples– and IPOs coming to market.

In the case of a big IPO wave –like the one this year with SpaceX listing and OpenAI and Anthropic likely to follow– history also shows these large market entrants tend to depress the market’s P/E multiple in the following year.

Normally, this would suggest US equities might be trading close to, or around, their peak this time around, but –no doubt you already guessed it– with earnings momentum as strong as it is, the index is expected to continue trending upwards.

AI Supercycle Is Broadening

Jason Adams, Portfolio Manager in the Global Equity Division at T. Rowe Price, likes to add some nuance to the ongoing powerful force that is the AI infrastructure buildout.

His view is investors are increasingly looking beyond the traditional beneficiaries and exposures to the early stage of the AI Supercycle, as “elevated expectations, broad ownership, and demanding valuations make it increasingly difficult … to keep driving market leadership”.

Investor focus is instead seen shifting toward parts of the supply chain where incremental spending can still translate into differentiated earnings upside.

Adams argues today’s AI capex opportunity set is broadening meaningfully to less obvious beneficiaries.

In T. Rowe Price’s view, AI is no longer solely a technology story; it is becoming a broader industrial and infrastructure investment cycle.

Investors are advised to seek opportunity in data centre infrastructure, electrical equipment, cooling, connectivity, construction, and services, as the AI buildout is driving activity across the real economy.

This then cycles back to where we started with ANZ Bank’s assessment of the economic outlook for Asia.

Extreme Polarisation Beneath US Indices

This week’s Weekly Insights mentioned US equities are as polarised as what investors in the Australian market are experiencing.

Two days later, we now have some market data by Franklin Templeton to back up that assessment (for those who haven’t read today’s Overnight Report).

• Only 209 stocks are outperforming the S&P 500 year-to-date
• 293 stocks are underperforming the index YTD
• 194 stocks are up more than 10% YTD
• 128 are down more than -10% YTD
• At the sector level, only five out of 11 sectors are outperforming: Energy, Information Technology, Industrials, Materials and Real Estate
• Sectors unable to keep up: Consumer Staples, Utilities, Communication Services, Financials, Consumer Discretionary and Health Care

In line with the aforementioned peers, Franklin Templeton remains “constructive” on US equities with an upgraded target range of 7,400-7,800 for the S&P 500 Index, driven by 15%-plus year-on-year (y/y) earnings-per-share (EPS) growth.

All-Weather Or Not?

Livewire Markets’ Chris Conway invited me earlier in the week to contribute to a story about All-Weather Performers. Below are my comments and notes, in alphabetical order.

Note: not all have made it into Livewire’s story.

The label says it all: an All-Weather Performer is able to grow shareholder wealth under most circumstances; come hail, rain, wind or sunshine.

Success stories usually have a strong market position, protected by a moat, or a leading product or technology, outside of hyper-cyclical industries, and seldom a cheap valuation (generally, one excludes the other).

Companies

Amcor ((AMC))

Operating in over 40 countries, from more than 400 locations and employing 75,000 employees, Amcor is one truly international giant on the ASX – even though Australia is no longer included.

Size is an important factor for companies aspiring to be an All-Weather Performer.

Amcor’s golden years essentially ran from 2008 until circa 2016, also carried by one highly advantageous acquisition from a debt-laden Rio Tinto during the GFC.

Things have become a lot more challenging since and I think Amcor is nowadays simply a sturdy, but growth-challenged, defensive.

Don’t expect anything spectacular.

Ansell ((ANN))

Ansell shares a lot of similar characteristics with Amcor, insofar that I used to place both in the same All-Weather basket.

Ansell sells in more than 100 countries and employs more than 15,000 employees in 58 countries, but it is many times over smaller in size.

And that, right there, is the key problem, together with cyclical end-users of some of its products and, at times, nasty, undercutting competition from Malaysia.

The company is yet to fully recover from the covid pandemic years.

Aristocrat Leisure ((ALL)) – currently held in the FNArena-Vested Equities All-Weather Model Portfolio.

Australia has a gambling addiction problem, but this global giant’s fortunes are closely linked to North America, where four-fifths of FY25 sales were made.

Aristocrat is no longer just about pokies machines; we’re now talking about a global gaming-content and technology group also including casino systems, social casino games, online real-money gaming, and iLottery.

Whenever some misguided commentary reaches my ear about Australia’s large-cap companies lacking ‘growth’, I casually refer to Aristocrat.

Without the slightest doubt, one of the prime growers in Australia, making most smaller caps equally jealous.

Computershare ((CPU))

Survivor of the dotcom era that continues to outshine more glamorous modern tech alternatives.

Its service offering is low-tech and dull, but its world-leading market position continues to pay dividends.

Who says all great stories must come to an end eventually? What do you mean Aussie tech cannot compete globally? AI ready to destroy software?

LOL.

This company continues to power on. Computershare is about to reinvent itself now digital tokens are getting ready to change the world of finance.

Goodman Group ((GMG)) – currently held in the FNArena-Vested Equities All-Weather Model Portfolio.

One all-important GFC lesson learned has created a local giant in developing industrial property assets, by now with a large skew towards data centres.

Its portfolio includes warehouses, distribution centres, business parks and data centres across 15 countries.

One of the most successful international growth stories on the ASX, but Goodman is also the largest constituent in the local REIT index, and valued as a reliable growth achiever in that low-growth, bond-proxied sector.

The latter is the problem for many; they don’t know how to ‘value’ it.

Macquarie Group ((MQG)) – currently held in the FNArena-Vested Equities All-Weather Model Portfolio.

Australia’s own millionaires’ Dream Machine! That favourable track record reflects the culture and the drive internally, more so than the businesses of asset management, banking, wealth management, advisory, et cetera.

More than any other company on the ASX that can be considered a High Quality performer, Macquarie relies on humans.

What this shows is there’s no one single formula to make it work.

ResMed ((RMD)) – currently held in the FNArena-Vested Equities All-Weather Model Portfolio.

Not always appreciated locally, but whenever tables are compiled of the best performers on Wall Street over the past 2-3 decades, ResMed usually features prominently.

Not recently though. Ever since the introduction of GLP-1s, the ResMed share price has faced periods of overwhelming selling pressure. Plus, healthcare globally remains on the nose.

Operationally, ResMed remains the global leader in what remains a structurally undiagnosed ailment. Growth won’t be double-digit every year, but there should still be plenty of it on the horizon.

TechnologyOne ((TNE)) – currently held in the FNArena-Vested Equities All-Weather Model Portfolio.

TechOne is the tortoise in a playground where hares run riot. Growth is never spectacular, but extremely consistent.

Growing at 10% per year means a business doubles in size every 7.2 years. TechOne does better, hence it doubles in less than every 5 years.

I wouldn’t bet against it doing exactly that, in particular after the global software de-rating.

Without any doubt, the prime example of a true-blue All-Weather on the ASX.

WiseTech Global ((WTC))

Love him or hate him, but from early AC/DC touring days, Richard White has built a truly remarkable local tech success story that one day might find itself at the centre of the world’s volumes in traded goods.

But as again proven this week, with yet another investigation announced into White personally, this time by the Australian Federal Police’s human exploitation taskforce, one-man key risk truly comes with risks for WiseTech these days.

It is for exactly this reason this stock is no longer included in the FNArena-Vested Equities All-Weather Model Portfolio.

Woolworths ((WOW)) – currently held in the FNArena-Vested Equities All-Weather Model Portfolio.

In Australia, the duopoly of Woolworths and Coles supermarkets remains a central force to be reckoned with, as also illustrated by the latter’s share price trading at an all-time record high.

Woolworths is the number one in size and for a long while it outperformed from this strong position. In recent years, the pendulum has swung in Coles’ favour.

Here’s a lesson for investors: when hubris enters management and the board, even the best of companies can lose their mettle.

Can Woolworths claw its way back? When avoiding hubris at the top, and taking guidance from the past, the answer should be yes.

RBC Likes Zip Co

RBC Capital‘s selection of best stock ideas among global financials includes the likes of ABN Amro, American Express, Blackstone, the London Stock Exchange and Moody’s Corp.

Plus ASX-listed Zip Co ((ZIP)).

RBC has a price target of $4.50, implying more than 30% upside from a share price that has already rallied strongly recently.

****

Tuesday’s Weekly Insights: https://fnarena.com/index.php/2026/06/24/rudis-view-this-too-shall-pass-but-markets-are-changing/

My curated selections and All-Weather Stocks: https://fnarena.com/index.php/analysis-data/all-weather-stocks/

FNArena’s dedicated GenAI section: https://fnarena.com/index.php/tag/gen-ai/

(Do note that, in line with all my analyses, appearances and presentations, all of the above names and calculations are provided for educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions.)  

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P.S. II – If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

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