Economist Justin Wolfers on Sunday said the U.S. stock market’s record-setting rally is being driven largely by a handful of artificial intelligence-linked companies, masking what he described as a much less impressive performance across the broader market.
AI Is Driving The Rally
In a video posted on X, Wolfers refers to a Goldman Sachs index that excludes major AI companies as well as businesses that supply or benefit from the sector.
“The puzzle for why stocks keep hitting new highs goes away the moment you take out AI,” Wolfers added.
Stocks at record highs can coexist with a pretty ordinary economy. Why?
— Justin Wolfers (@JustinWolfers) July 12, 2026
A handful of AI-linked firms are driving much of the market's gains. Strip them out, and the rally looks a lot less impressive. pic.twitter.com/X5KFcAiEU1
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Economy Treads Water Outside AI
Wolfers said that the U.S. economy appears to be “treading water” outside the AI sector, even as AI-related investment continues to fuel equity markets, and added that much of the spending currently supporting the economy is tied to AI.
While the technology has become a major source of capital investment, Wolfers said it has contributed relatively little to employment growth, describing data centers as highly capital-intensive facilities with few workers.
According to data from Bank of America, Nvidia Corp. (NASDAQ:NVDA), Micron Technology Inc. (NASDAQ:MU), Broadcom Inc. (NASDAQ:AVGO), and Applied Materials Inc. (NASDAQ:AMAT) will generate a record $430 billion in combined free cash flow over the next 12 months, while the combined free cash flow of major hyperscalers is projected to turn negative.
AI-related capital spending by the largest hyperscalers is expected to reach roughly $1.8 trillion across 2026 and 2027.
The S&P 500 and Nasdaq have climbed 10.45% and 13.11%, respectively, so far this year, with AI-linked stocks accounting for a significant share of those gains.
Market Gains Remain Concentrated
Goldman Sachs’ AI-excluded index, he said, shows the broader market has delivered a much weaker performance than headline benchmarks, underscoring how heavily recent gains have been concentrated in AI-related companies.
According to Benzinga Edge rankings, NVIDIA has a Momentum score in the 74th percentile and a Growth score in the 98th percentile.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo Courtesy: jira pliankharom on Shutterstock
