Bernstein Maintains Long-Term AI Outlook Despite Stock Downturn

Bernstein analyst Daniel Zhu maintains a long-term positive outlook on artificial intelligence infrastructure despite a recent downturn in AI-linked stocks, including a 38% drop in the SOX semiconductor index from its June high. Zhu admitted the firm was wrong to be bullish in the short term, attributing the decline to multiple compression rather than poor earnings estimates.

Zhu addressed bear arguments regarding AI lab economics and land and power constraints. He noted that Democratic midterm victories and Texas Governor-elect Gina Hinojosa's campaign for a moratorium on data center approvals create risks for 2028, though he believes the impact on 2027 remains limited. He estimates hyperscalers will have $1.2 trillion of AI infrastructure online by 2027.

Following this analysis, Bernstein reiterated Outperform ratings for networking companies Arista and Celestica. However, the firm lowered price targets for Lumentum, Celestica, and Corning.