S&P 500 Rally Driven by Earnings, AI Spending

For investors, that matters because this is no longer just a narrow AI trade. Barclays said about 46% of companies discussed AI substantively in second-quarter earnings calls, and 30% tied it directly to revenue, cost cuts or operational efficiency. That is the kind of adoption curve markets pay up for: AI is moving from story to margin driver, expanding the profit pool not only for semiconductors and cloud platforms but also for the software, infrastructure and industrial names enabling deployment.

There is also a less-discussed fiscal tailwind underneath the market. US companies have been receiving large tariff refunds after the Supreme Court ruling in February, adding a fresh boost to corporate cash flow at a moment when earnings momentum is already strong. Goldman Sachs analysts said Kohl’s alone received about $100 million back, and the aggregate refunds amount to tens of billions of dollars across corporate America. That is meaningful because it shores up balance sheets, supports buybacks and gives management teams more room to keep investing.

The market is still not without friction. The 10-year Treasury yield has risen to 4.78%, pushing up financing costs and making equity valuations more sensitive to any disappointment in earnings or guidance. Macquarie’s Thierry Wizman warned that a move above 5% could crimp corporate profits and even slow AI investment, which has become one of the market’s biggest capex engines. September seasonality and higher oil prices tied to the Iran conflict add another layer of caution.

But the larger message is clear: the US equity rally is being underwritten by earnings, liquidity and a powerful technological spending cycle, not just multiple expansion. That is why I believe the next leg of the trade still belongs to the picks-and-shovels names behind AI infrastructure, the companies with pricing power and the balance sheets to absorb higher rates. If yields stabilize, the upside could broaden further; if they keep climbing, expect capital to concentrate even more in the highest-quality beneficiaries of the AI and infrastructure buildout.