Above the Noise: AI, markets, and momentum

Key takeaways

• The AI story didn’t change. Investors’ interpretation did, and that shift has broadened the opportunity set beyond a handful of companies.
• Simultaneous peaks in oil prices, inflation expectations, and interest rates may create a good macro backdrop for markets — the kind that may help improve market breadth.
• Space as an investible theme is interesting — and it’s one that could have implications all across the market-cap spectrum beyond the SpaceX IPO.

Every so often, life throws you a familiar moment, and it makes you more emotional than you’d expect. In 1994, the week I graduated high school, the New York Rangers ended a 54-year drought as captain Mark Messier, wearing number 11, lifted the Stanley Cup. In 2026, the week my oldest daughter graduated high school, the New York Knicks ended a 53-year drought as captain Jalen Brunson, also wearing number 11, raised the Larry O’Brien Trophy. Two championships, two captains, two elevens, and two milestones for the Levitt family. It’s the first time in a long while that I can remember having tears in my eyes twice in one week.

What strikes me is how unexpected both the Rangers and Knicks championship runs felt while they were happening. Years of disappointment conditioned New York fans to anticipate collapse, even as the evidence of greatness was right in front of us. Only in hindsight do you realize how good those teams were.

Broad AI opportunity set

That shift in belief feels remarkably similar to the market’s experience with artificial intelligence (AI) this year. At the start of 2026, the dominant narrative was that AI was a bubble destined for disappointment, a replay of 1999, when the Knicks last reached the Finals at the peak of the tech bubble.¹

But just as the Knicks roster didn’t change much this season, neither did the underlying information about AI. What changed was the interpretation. Many investors had been viewing AI too narrowly, through the lens of chatbots, model training, and a single company graphics processing unit (GPU) story. What they missed was the emergence of agentic AI and the broader infrastructure required to support continuous, system-wide usage. The opportunity was never about episodic chatbot interactions. It was about persistent, embedded intelligence becoming part of the economic fabric. As that realization spread, the opportunity set broadened beyond a handful of companies that operate massive cloud platforms and select semiconductor firms to a broader ecosystem. The result was a powerful repricing as investors caught up to reality.²

Expectations are high now. For the markets as they adjust to a world reshaped by AI. For my daughter as she heads off to college. For the Knicks as they look to build on their success. High expectations can feel daunting, but can be a sign of progress. And at this moment, for all three, that feels right.

It may be confirmation bias but …

… simultaneous peaks in oil prices,³ inflation expectations,⁴ and interest rates⁵ create a good macro backdrop for markets in my view — the kind that could help market breadth to improve. What surprised me most during the war with Iran was how many people treated the closure of the Strait of Hormuz and the resulting oil shock as the long‑awaited moment when inflation would spiral, and the Federal Reserve (Fed) would lose control. It’s the story the permabear crowd has been rehearsing for years, even if history had suggested otherwise. Historically, oil shocks haven’t resulted in sustained inflation.⁶ Markets have typically performed well in the months following the start of geopolitical conflicts, as long as the economy was in good shape when the conflict began.⁷ This time, thus far, hasn’t been different.⁸

It was said

“I like stocks. I just don’t like the index.”

 —Savita Subramanian, Head of US Equity Strategy, Bank of America

Savita Subramanian made headlines for warning that the market was flashing classic late‑cycle signals — narrow leadership, speculative excess, and extreme price movements among them. But reading past the headlines reveals a more balanced message. She emphasized that markets may stay narrow,⁹ overvalued,¹⁰ and irrationally crowded for longer than investors expect, especially when liquidity has been abundant and narratives like AI have remained powerful. Nonetheless, she doesn’t like the S&P 500 Index, which she views as overly concentrated and vulnerable. She does like stocks, meaning selective opportunities beneath the surface. 

Fortunately, cooling inflation,¹¹ moderating interest rates,¹² and the potential for AI-driven productivity gains across sectors and industries are likely to create room for broader and healthier market rotation, in my view.

Phone a friend

I’ve been asked to opine on the SpaceX IPO. (I don’t offer views on individual stocks in Above the Noise.) The idea of space as an investible theme is interesting — and it’s one that could have implications all across the market-cap spectrum. I reached out to Michael Oliveras, Head of Global Small Caps at Invesco, about his views on the economics of space. He said:

“When people talk about the SpaceX IPO,¹³ conversation often centers on the rockets that launch and then land themselves. Reusable rockets could push launch costs down to something approaching air‑freight economics, which would make entirely new business models viable. In a solar‑synchronous orbit, energy is effectively free, and data centers don’t need cooling, so the main constraint becomes getting payloads into space cheaply. If that constraint falls, space shifts from one‑off government programs to true industrialization, including serialized production, lower costs, and expanding profit pools. While the headlines focus on the giants, the ripple effects could benefit smaller businesses building satellites, communications systems, cybersecurity tools, and in‑space services.” 

Listen to our recent conversation with Michael on the Greater Possibilities podcast.

Think/Rethink: Where familiar beliefs meet inconvenient evidence

Think: AI is killing jobs.

Rethink: Companies that adopt AI most aggressively are seeing faster headcount growth (52% versus 36%) compared to less AI‑exposed companies.¹⁴

On the road again

My travels took me to Iceland, where I joined my closest childhood friends to celebrate our 50th birthdays. It was the kind of place that lets you engage in as much activity as you would like. Highlights included snowmobiling across a glacier, snorkeling between tectonic plates in water so clear it feels unreal, and hiking the rim of a volcanic crater that looks like it belongs on another planet.

While taking in the landscape, I kept coming back to how extraordinary Iceland’s economic recovery has been since the Global Financial Crisis. Few countries were hit as hard, and even fewer responded with such radical steps, including letting oversized banks fail, imposing capital controls, and allowing the currency to crash. Iceland could do this because it is small, nimble, and not systemically important to global finance. The US, by contrast, doesn’t have that luxury. Its financial system is deeply interconnected with global markets, the dollar anchors world trade, and US stability is effectively a global public good. Moves that worked for Iceland would trigger global contagion if attempted here. And yet, as I stood on a glacier looking out over miles of untouched ice, it was also clear why Iceland bounced back so strongly. It’s a remarkable place to visit, and the wave of tourism that followed the crisis has become one of its most powerful economic engines.

—

Originally Posted June 23, 2026

Above the Noise: AI, markets, and momentum by Invesco US

Footnotes

1. Source: Bloomberg L.P., based on the returns on the S&P 500 Index, which peaked on March 24 and troughed on Oct. 9.
2. Source: Bloomberg L.P., June 16, based on the year-to-date return of S&P 500 Index Industry Groups Semiconductor and Semiconductor Equipment (+43.81%) and Technology Hardware and Equipment (+29.18%).
3. Source: Bloomberg L.P., June 16, based on US West Texas Intermediate Crude Sweet Oil.
4. Source: Bloomberg L.P., June 16, based on the 3- and 5-year US Treasury inflation breakeven. A breakeven inflation rate is a market-derived estimate of future inflation, calculated by comparing the yield on a standard government bond (nominal) to the yield on a Treasury Inflation-Protected Security (TIPS) of the same maturity.
5. Source: Bloomberg L.P., June 16, based on the 10-year US Treasury rate.
6. Source: Bloomberg L.P., May 31, based on the quarterly correlation of 0.29 between oil prices and US Consumer Price Index since 1976.
7. Source: Bloomberg L.P., June 16, based on the 12-month returns of the MSCI World Index from the start of conflicts. Past performance does not guarantee future results. The analysis includes conflicts that began in Oct. 1973 (-35.52%), Jan. 1980 (11.23%), April 1982 (29.87%), Aug. 1990 (6.34%), Feb. 1991 (-1.19%), April 1999 (12.92%), Oct. 2001 (-14.42%), March 2003 (44.63%), Nov. 2015 (3.83%), March 2022 (-6.50%), and Oct. 2023 (34.33%).
8. Source: Bloomberg L.P., June 16, based on the performance of the S&P 500 Index (+10.53%) from the start of the conflict on Feb. 27 to June 15.
9. Source: Bloomberg L.P., June 16, based on the year-to-date performance of the S&P 500 Index and the S&P 500 Equal Weight Index.
10. Source: Bloomberg L.P., June 16, based on the cyclically adjusted price-to-earnings ratio of the S&P 500 Index.
11. Source: Bloomberg L.P., June 16, based on the 3- and 5-year US Treasury inflation breakeven. A breakeven inflation rate is a market-derived estimate of future inflation, calculated by comparing the yield on a standard government bond (nominal) to the yield on a Treasury Inflation-Protected Security (TIPS) of the same maturity.
12. Source: Bloomberg L.P., June 16, based on the 10-year US Treasury rate.
13. The mention of individual companies is not intended as investment advice.
14. Source: PricewaterhouseCoopers, “2026 Global AI Jobs Barometer,” June 15.

Important information

NA5584696

All investing involves risk, including the risk of loss.

Past performance does not guarantee future results.

Investments cannot be made directly in an index.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

Artificial intelligence (AI) technology companies are sensitive to specific risks such as small markets, business cycle changes, economic growth, technological progress, obsolescence, and regulation. These companies may have limited products, markets, resources, or personnel, making their securities more volatile, especially for smaller start-ups. Rapid technological changes can adversely affect their results. AI companies often rely on patents, copyrights, trademarks, and trade secrets to protect their technology, but there’s no guarantee these protections will be sufficient. Significant research and development (R&D) spending doesn’t ensure product or service success.

The Consumer Price Index (CPI) measures the change in consumer prices and is a commonly cited measure of inflation.

Contagion is the likelihood that significant economic changes in one country will spread to other countries.

Correlation is the degree to which two investments have historically moved in relation to each other.

In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic, and political conditions.

Inflation is the rate at which the general price level for goods and services is increasing.

Market breadth is a concept used in technical analysis to gauge the direction of the overall market by examining the number of companies advancing relative to the number of companies declining.

The MSCI World Index is an unmanaged index considered representative of stocks of developed countries.

Option-adjusted spread (OAS) is the yield spread that must be added to a benchmark yield curve to discount a security’s payments to match its market price, using a dynamic pricing model that accounts for embedded options.

The price-to-earnings (P/E) ratio measures a stock’s valuation by dividing its share price by its earnings per share.

The S&P 500® Equal Weight Index is the equally weighted version of the S&P 500® Index.

The S&P 500® Index is an unmanaged index considered representative of the US stock market.

The S&P 500 Semiconductors and Semiconductor Equipment Industry Group is a classification within the Global Industry Classification Standard (GICS) that contains companies primarily engaged in the design, manufacture, and sale of semiconductors and the machinery used to produce them.

The S&P 500 Technology Hardware and Equipment Industry Group is a classification within the Global Industry Classification Standard (GICS) within the Information Technology sector. It classifies companies that manufacture physical computing, networking, and electronic equipment.

Treasury Inflation-Protected Securities (TIPS) are US Treasury securities that are indexed to inflation.

West Texas Intermediate (WTI) is a type of light, sweet crude oil that comes from the US.

The opinions referenced above are those of the author as of June 23, 2026. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations.