Why are AI-linked shares seeing a return to favour?

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AI-linked shares are returning to favour because bullish sentiment around artificial intelligence is overriding earlier valuation concerns.
AI-linked shares had pulled back in recent weeks after investors questioned whether their soaring valuations were excessive, but the market shifted back toward the trend that had dominated much of the quarter. In the same session, US indices rose alongside the Nasdaq, with bullishness over artificial intelligence described as outweighing worries over geopolitics and inflation.
The earlier pullback reflected valuation doubts from investors
In recent weeks, AI-linked shares fell back as investors questioned whether their valuations, which had risen sharply, were excessive. That concern set the stage for a weaker period in AI-related stocks before the rebound seen on Tuesday.
Tuesday’s move aligned with broader US market optimism on AI
The Nasdaq rose 1.5 per cent to 26,213.72, helping it cap its best quarter in six years with gains of 21.4 per cent over the three months through June. The wider rise in US equities was attributed to bullishness over artificial intelligence, which the report frames as overcoming worries about geopolitics and inflation during that period.
The session’s tone pointed to sustained optimism into the next quarter
A market strategist at FHN Financial, Chris Low, said that when a quarter ends strongly, profit-taking often appears on the last day, but that this was not happening “today,” signalling optimism about the third quarter as well. While this comment was not limited to AI-linked stocks, it matches the broader risk-on tone in which AI-linked shares returned to favour.
Other macro factors were also in play, but the report ties the shift to AI sentiment
The report also discussed oil prices falling after a memorandum of understanding between the United States and Iran, alongside comments that lower energy prices could help support growth. However, the specific explanation provided for the AI-linked rebound is that bullishness over artificial intelligence regained the upper hand after valuation worries had weighed on sentiment.

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Why are AI-linked shares seeing a return to favour?

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