Evercore ISI: AI selloff is a buying opportunity
QQQ•Evercore ISI says the AI-driven selloff is a buying opportunity, with its risk barometer at four of 10 indicators flashing red; a reading above seven signals an unattractive risk/reward. The firm remains long its “AI Class of 2026” stocks unless credit spreads widen or earnings revisions turn.
1. Risk barometer reading
Evercore ISI argues the structural bull market remains intact despite yields at decade-plus highs. Its updated “AI FOMO Risk Barometer” has four of 10 indicators flashing red, while a reading above seven signals an unattractive risk/reward.
2. Pressures and strengths
The firm says AI’s reliance on raising capital has collided with high yields, while heavy index concentration has sharpened the selloff. Hyperscalers’ 12-month forward free cash flow has fallen to negative $200 billion, and equity risk premiums are near zero. Evercore also cites healthy leverage, strong AI demand, growing backlogs, low vendor financing risk, solid jobs and rising earnings estimates.
3. Investment positioning
Unless credit spreads widen or earnings revisions turn, Evercore remains long its “AI Class of 2026” stocks. It also favors under-owned discretionary and rate-sensitive names, as well as negative-beta stocks as a hedge.
