Wei Li – Global Chief Investment Strategist BlackRock Investment Institute together with Chris Weber – Head of Climate Research, Natalie Gill – Senior Portfolio Strategist and Beata Harasim – Senior Investment
Strategist, all forming part of the BlackRock Investment Institute and Helen Jewell – International Chief Investment Officer for Fundamental Equities from BlackRock share their insights on global economy, markets and geopolitics. Their views are theirs alone and are not intended to be construed as investment advice.
Key Points
A supercharged mega force : We view AI as a supercharged mega force as buildout spending is rising from already-historic levels, supporting our overweight U.S. and EM stocks.
Market backdrop : Oil fell as Iran pledged to open the Strait of Hormuz during the Lebanon ceasefire. Both the S&P 500 and the Nasdaq hit new record highs.
Week ahead : We watch global flash PMIs for signs of any growth drag, supply chain disruptions and price pressures from the Middle East conflict.
U.S.-Iran talks to end the Middle East conflict have boosted stocks to new record highs. Tech has helped drive the gains – and what’s becoming clearer is the building strength of the AI theme. Our conviction in the AI transformation grows as we see broad gains in revenues and already-historic capital spending even as U.S. tech valuations are back on par with the overall market. This reinforces our U.S. equity overweight and preference for AI thematic opportunities.
Equity markets have rebounded on hopes for a resolution to the Middle East conflict, with the S&P 500 hitting a new record high. Tech stocks and the AI theme have led the gains, with the U.S. tech sector up 11% so far this month. We are seeing broad improvements in the drivers of the AI theme across capital spending and revenues after a notable drop in valuations. First, we had already expected the fastest capital spending buildout in history as we laid out in our 2026 Global Outlook – and consensus expectations have only risen since then, with “hyperscaler” mega cap tech companies’ estimates for 2026 to 2030 up over 25% since October. See the chart. Second, we are seeing rapid revenue gains for some AI model builders. And third, U.S. tech valuations are now in line with the broader S&P 500 even as tech earnings expectations have risen sharply, as we noted last week.
In our 2026 Outlook, we identified three potential constraints on the AI buildout: power, politics and financing. The energy constraint is front and center and is starting to bind – but we have seen some improvements. “Behind the meter” power generation solutions – which generate power without a grid connection, help avoid potential delays from connecting to the grid and can limit impacts on local electricity prices – are set to move from being a marginal source to powering about 25-30% of new U.S. data centers in coming years, our compilation of equipment company estimates and Sightline Climate Data show. Yet supply disruptions from the Middle East conflict have caused a sharp spike in natural gas prices – a key source for powering AI data centers. The impact is regional in nature: Europe and larger Asian economies feel the disruptions more, while the U.S. is a net exporter with much lower prices. We think this, combined with “behind the meter” solutions, gives the U.S. an edge on AI. China’s diversified energy mix and nuclear and renewable energy leadership means it is also less affected.
Watching political constraints
On the U.S. political front, anti-AI data center sentiment is rising and creating pressures that could constrain the AI buildout. Maine’s legislature passed a temporary ban on large new data centers – a first among states in a new trend. At least 12 other states are looking to pause further AI data center building. We are monitoring the impact of these potential restrictions and their scale heading into U.S. elections later this year.
The AI buildout financing has played out as we explained in our Outlook’s leveraging up theme. Demand for bonds from hyperscalers has been strong, with an Amazon sale seeing demand quadruple the total amount sold. We view this leverage as necessary to get over the hump between front-loaded investment and backloaded revenues – and think it’s healthy so far. Upcoming new listings of key AI model builders and players will test this financing in equity markets. The rapid revenue gains of some model builders should be supportive, such as Claude model-maker Anthropic reporting a tripling of revenue to over $30 billion since the end of 2025. The depth of U.S. capital markets is another edge in the AI transformation.
Our bottom line
We stay overweight to U.S. and EM stocks, and see the AI mega force accelerating. Recent developments including energy disruptions reinforce the U.S. edge in AI. We also like AI thematic opportunities in power and infrastructure.
Market backdrop
Oil prices fell as Iran declared that the Strait of Hormuz would be open throughout the 10-day Lebanon ceasefire, ending the week at about $90. Both the S&P 500 and the Nasdaq hit record highs, with the latter posting its longest winning streak since 1992. Solid U.S. corporate earnings and a potential peace deal could buoy them further, in our view. U.S. 10-year Treasury yields dipped to 4.25%, but are still up more than 20 basis points since the conflict began.
We watch global flash PMIs for signs of any drag on growth from the supply chain disruptions tied to the Middle East conflict. We also watch Japan’s CPI and PPI to see if the Bank of Japan can look through conflict-driven cost pressures and stay on track to achieve 2% inflation by the end of 2027. UK unemployment hovers around its post-pandemic peak, so next week’s unemployment and inflation data – the first since the conflict began – will highlight the Bank of England’s inflation-growth trade-off.
Week Ahead
April 21 : UK unemployment
April 22 : UK CPI; Japan trade balance
April 23 : Global flash PMIs
April 24 : Japan CPI and PPI
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