Jefferies forecasts that earnings growth for AI-linked stocks will drop sharply from 100% in 2026 to 22% by 2028. High valuations—with AI stocks trading at 23 times earnings against 13 times for non-AI sectors—suggest that investors may need to look at portfolio diversification.
Global financial markets are witnessing a shift in sentiment toward artificial intelligence-linked stocks. A new report by Jefferies highlights that the period of hyper-growth for companies heavily exposed to AI is likely approaching a transition phase. Analysts project that earnings growth for these stocks, as measured within the MSCI AC World Index, is set to decline significantly. Growth is expected to cool from 100 percent in 2026 to 30 percent in 2027, with a further deceleration to 22 percent by 2028.
This trend poses questions for investors and fund managers who have relied on the AI sector to drive portfolio returns. The primary concern cited is the stark difference in valuations. Global AI stocks are currently trading at a forward price-to-earnings multiple of 23 times, which is nearly double the 13 times multiple commanded by stocks outside the AI sphere. This valuation gap suggests that the market may be pricing in more aggressive growth than what is realistically expected in the coming years.
For investors, this valuation premium creates potential risk if earnings performance fails to meet high expectations. Even in emerging markets, where AI-focused stocks experienced a rapid rise, momentum has shown signs of stalling in the second half of 2026. This environment is pushing some institutional investors to pivot toward non-AI sectors that offer more stable earnings projections and what analysts describe as more attractive entry points.
While the outlook for broader AI-linked growth is cautious, Jefferies maintains positions in critical infrastructure providers, including Taiwan Semiconductor Manufacturing Company, Samsung Electronics, and SK Hynix. However, these positions are kept underweight relative to regional benchmarks. These semiconductor giants remain influential in the MSCI AC Asia ex-Japan Index, where they account for over 32 percent of the total weighting. This heavy concentration forces investors to maintain exposure to these volatile chipmakers, even as the period of easy, rapid gains appears to be fading.
The key lesson for investors in this environment is the importance of checking valuations before entering positions. The market is moving from a phase where AI growth was the singular focus to a more complex environment where earnings sustainability, profit margins, and valuation comfort will likely take precedence. Investors may want to track how these AI-linked companies perform in upcoming quarterly results, specifically looking for evidence that their profit margins can be maintained despite the projected slowdown in earnings growth.