Jefferies Sees AI Basket EPS CAGR 38.5% with 0.6x PEG Valuation
JEF•Jefferies says AI stocks drove 80% of S&P 500 gains in 2026 and its AI basket’s forward earnings estimates have risen over 30% since mid-2025 with a projected EPS CAGR of 38.5%. The basket trades at 25 times forward earnings and a 0.6 PEG ratio.
1. AI Gains Fueled by Earnings Expansion
Jefferies strategists highlight that AI-linked stocks contributed over 80% of the S&P 500’s gains this year, driven by a more than 30% increase in forward earnings estimates for their AI basket since mid-2025 and a projected EPS CAGR of 38.5% for 2026-27.
2. Valuations Point to Undervalued Opportunities
Despite strong EPS growth, the AI basket trades at about 25 times forward earnings and holds a PEG ratio of just 0.6, remaining below its historical one-standard-deviation valuation threshold and suggesting further upside potential.
3. Sub-Sector Performance Diverges
Within the AI theme, memory and compute technology stocks have delivered the strongest returns and appear most attractive on PEG metrics, while hyperscaler platforms and chip design firms have lagged, reflecting uneven performance across AI sub-sectors.
