Economics and markets

How much upside remains for AI-driven equity returns?

July 14, 2026

Much of AI’s promise is already priced into equity markets, so is there any opportunity left for investors? In this short video, Qian Wang, our global head of capital market research, discusses how price/earnings ratios have historically compressed as growth matures.

An AI-driven earnings boom could still justify elevated prices for a while yet, but the bigger opportunity may be hiding in plain sight—value stocks, international equities, and ultimately the businesses that use AI rather than build it. Productivity gains from a transformative technology tend to flow to end users, not just the technology’s builders.

Read the transcript

Qian Wang: Can AI continue to push equity markets higher? Will it transform the economy?

At Vanguard, we are bullish on AI as a long-term economic force. For the next year or two, AI is well-placed to create a genuine earnings boom, and strong earnings can allay market concerns about high valuations.

But with the market already counting on a lot of AI upside, the question is, what return remains for investors in the future? Even if AI fulfills its lofty promise, history shows that price/earnings ratios typically recede as earnings growth matures.

At this moment, market expectations for AI’s potential rewards are high and concentrated in a narrow group of large tech companies in the U.S. and Asia.

On the other hand, markets may be underestimating the potential benefit to value companies and to broader ex-U.S. equities in the longer term should AI transform the economy.

We do believe AI will enhance productivity, but the key question is, who captures those gains? If AI truly transforms the economy, the ultimate winners may be the AI’s end users that improve productivity without bearing the upfront investment.