Global equity market performance and AI-led technology investment: Emerging markets and technology led a 0.9% rise in global equities

Overview

This Global Weekly Kickstart reviews global equity, sector, macro and cross-asset conditions. Goldman Sachs highlights a week led by emerging markets and technology, then examines whether strong AI-related spending, improving monetisation and continued earnings growth can support the technology-led market backdrop.

Core views

Global equities advanced 0.9% in the week, with emerging markets up 1.3% and Europe broadly flat at 0.1%. Leadership was concentrated in technology, up 3.3%, and communication services, up 1.6%, while utilities fell 2.5%. The report also notes that emerging-market gains coincided with further strength in momentum relative to the broader market. Across commodities, copper rose 1.3% amid persistent tariff uncertainty, gold declined 1.6%, and Brent was broadly stable, up 0.3%. The central thematic discussion is the scale and economic return of AI investment. Goldman Sachs says AI capital expenditure remains exceptionally strong but expects the growth rate to slow. It forecasts US hyperscalers will spend $800 billion in 2026, $1.2 trillion in 2027 and $1.4 trillion in 2028. The key analytical question is whether AI revenue can justify that investment: the report estimates that hyperscalers may need roughly $300 billion of annual AI revenue to break even. It sees evidence that monetisation is accelerating, citing 48% year-on-year cloud-revenue growth in Q2 2026 and $1.7 trillion of backlog across the three largest cloud providers. For US earnings, the report characterises the current level as elevated but expects deceleration rather than a collapse. S&P 500 earnings grew 51% year on year in Q2, driven by AI investment, semiconductor margins and investment-related income. Goldman Sachs forecasts 11% EPS growth in both 2027 and 2028 and expresses a preference for hyperscalers and semiconductors. Consensus data in the report similarly show information technology with estimated 2026 sales growth of 40.5%, EPS growth of 86.4% and net margin of 28.8%, followed by 2027 estimates of 29.7%, 40.8% and 30.9%, respectively. The broader dashboard frames these themes against growth, valuation, sentiment, flows and style indicators. Goldman Sachs' GDP forecasts show world growth of 2.6% in both 2026 and 2027, with developed markets at 1.7% and 1.6%, respectively, and emerging markets at 3.8% and 3.9%. Its Bull/Bear Market Indicator stands at the 67th percentile, with the Shiller P/E at 40.8 and the 98th percentile. The report tracks forward P/E valuation, equity risk premia, earnings revisions, implied volatility, skew, fund flows and correlations rather than presenting a single market valuation conclusion. Goldman Sachs' regional sector-weight table is selective. It is overweight information technology in Asia-Pacific ex-Japan, financials in Europe, Japan and Asia-Pacific ex-Japan, industrials in Japan and Asia-Pacific ex-Japan, and materials in the US. It is underweight consumer discretionary in Europe, consumer staples in Japan and Asia-Pacific ex-Japan, health care in Europe and Japan, and utilities in Japan and Asia-Pacific ex-Japan.

Analysis framework

The report combines weekly market-return data with macro forecasts, consensus sales/EPS/margin estimates, earnings revisions, forward valuation measures, investor-flow data, volatility and correlation indicators, and regional sector-weight recommendations. Its AI discussion compares projected capital expenditure with estimated revenue required to break even and then tests that gap against cloud-growth and backlog evidence.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  12-month and 24-month forward P/E comparisons

  The report uses forward price-to-earnings multiples and their historical relative levels to compare valuation across global regions, sectors and investment styles.

• Industry AnalysisVolume-price decomposition

  AI capital expenditure versus required AI revenue and monetisation evidence

  Goldman Sachs assesses whether spending can generate an adequate return by comparing hyperscaler investment with estimated break-even revenue, cloud-revenue growth and backlog.

• Quantitative, Factor, and Portfolio TheoryStyle factor analysis

  Momentum, value versus growth, small-cap versus large-cap, and cyclicals versus defensives

  The report compares style-index returns and forward valuation premiums or discounts to show which equity factors are leading and how they are priced.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Emerging-market equities

  Led global equity gains during the week.

  Strengths

  Rose 1.3% and coincided with further momentum strength relative to the market.

  Comparison

  Outperformed global equities, which rose 0.9%, and Europe, which rose 0.1%.

• Technology sector

  Weekly market leader and primary beneficiary of AI investment.

  Strengths

  Returned 3.3% for the week; AI investment, semiconductor margins and cloud monetisation underpin the report's discussion.

  Weaknesses

  AI spending growth is expected to slow.

  Comparison

  Outperformed communication services at 1.6% and utilities, which fell 2.5%.

  Risks

  Whether AI revenues can justify projected hyperscaler capital expenditure.

• Hyperscalers and semiconductors

  Goldman Sachs' stated preferred US equity exposures.

  Strengths

  Supported by AI investment, accelerating monetisation, cloud-revenue growth and backlog.

  Weaknesses

  US earnings are elevated and expected to decelerate.

  Risks

  AI revenue may not reach the level required to justify investment.

Key data

• Global equities weekly return+0.9%One-week gain
• Emerging-market equities weekly return+1.3%Led global regional performance
• Technology sector weekly return+3.3%Led sector performance
• US hyperscaler AI capital expenditure$800bn / $1.2tn / $1.4tnGoldman Sachs forecasts for 2026, 2027 and 2028, respectively
• Estimated annual AI revenue needed to break evenAround $300bnHyperscaler estimate
• Cloud revenue growth48%Year-on-year growth in Q2 2026
• Largest cloud-provider backlog$1.7tnAcross the three largest cloud providers
• S&P 500 earnings growth51%Year-on-year growth in Q2
• Goldman Sachs US EPS growth forecast11% in 2027 and 11% in 2028The report expects deceleration rather than an earnings collapse
• GS Bull/Bear Market Indicator67%Average-percentile indicator

Impact & implications

The report links recent market leadership to AI-related technology investment and earnings strength, while making the future return on hyperscaler spending the central issue. Its preferred exposures are hyperscalers and semiconductors, and its regional sector framework favors information technology in Asia-Pacific ex-Japan and financials in Europe, Japan and Asia-Pacific ex-Japan.

Risks

• The report identifies uncertainty over whether AI revenues can justify exceptionally high hyperscaler capital expenditure.
• Persistent tariff uncertainty was cited alongside the weekly rise in copper.
• The elevated Shiller P/E of 40.8, at the 98th percentile, is reflected in the report's market-risk dashboard.

What to watch

• US Core PCE and employment reports, as well as Federal Reserve official speaking engagements.
• European flash HICP releases, unemployment data and final manufacturing PMIs.
• Japan's September BOJ Tankan, BOJ Summary of Opinions and Tokyo CPI.
• Regional PMI data, Indonesia CPI, and Korean industrial-production and export data.
• AI monetisation, cloud revenue growth and backlog relative to projected hyperscaler spending.