Markets still pricing in strong AI growth despite mixed earnings signals: Seth R Freeman

Global equity markets continue to surprise investors with their resilience, even as macroeconomic risks intensify in the background. Speaking to ET Now, market expert Seth R Freeman from GlassRatner Advisory highlighted that the current rally remains narrowly driven and heavily influenced by the ongoing artificial intelligence (AI) theme.

When asked how he is rationalising the equity market move amid global uncertainty, Freeman said, “Yes, it is just incredible but we have to remember it is still being led by a very small number of stocks.”

The concentration of gains in a few large-cap technology names, particularly those tied to AI, has raised questions about the sustainability of the broader rally.


AI remains the dominant force in markets
On whether the current earnings season is purely earnings-driven, especially in the US tech space, Freeman pointed directly to the AI narrative as the key driver.

“Yes, it is all about AI. I know though Nvidia was up but not as much as expected and we are also seeing in terms of technology, hardware more broadly. So, it is a little boom here and it is a little concerning because at the same time we are reading about how inventories of chemicals and petroleum based products urea and other commodities that have been coming from the Middle East are going to start running low and this is going to have a real inflationary impact,” he said.

While AI-linked stocks continue to attract strong inflows, he also flagged emerging supply-side pressures that could reintroduce inflation risks, particularly through energy and commodity channels.

Is the AI trade overdone?
With most major “Magnificent Seven” earnings now out, concerns have emerged over whether the AI-led rally may lose momentum. Freeman, however, believes the enthusiasm still has room to run.

“Well, there is still a lot of enthusiasm and there is a lot of money chasing AI and AI related companies. So, it is going to be sustainable for some time. I do not see just because earnings have come out, because we have to remember stock prices are supposed to reflect future expectation.”

According to him, markets are forward-looking and continue to price in long-term AI growth, even if short-term earnings surprises are mixed.

Bond yields, inflation and policy pressure build up
Attention is also shifting to rising US bond yields and what they signal about the next phase of monetary policy. Freeman noted that political and economic pressure on policymakers is likely to intensify.

“He is going to be under a lot of pressure not to hike rates, but we are going to have to wait until the next inflation reports, again once we really see the impact of what has been going on in the Middle East, food prices are already quite a bit higher in the US and now we are seeing even in areas where historically gas prices, petrol prices have been low are now over $4 and that is going to get…, this really becomes a deeply political problem very quickly.”

Rising fuel prices and broader commodity pressures, he suggested, could complicate the Federal Reserve’s decision-making path, especially as inflation data begins to reflect geopolitical disruptions.

Yields signal what markets fear most
On the sharp move in US 10-year yields and its implications across asset classes, Freeman said the bond market is essentially pricing in future inflation risks.

“Well, the rise in rates or yields reflects exactly what I was saying, just the anticipated inflation coming and that we have not really seen it yet and again the markets are telling us a little bit about the future.”

With equities, bonds, gold, and even crypto reacting to shifting expectations, investors appear to be navigating a market environment increasingly driven by forward inflation bets and concentrated tech optimism.

Market takeaway
While AI continues to anchor the equity bull narrative, rising bond yields and geopolitical inflation risks are quietly building pressure beneath the surface. The result is a market that looks strong on the index level, but increasingly fragile in its underlying breadth.