Trivariate Research says higher interest rates and political pushback could compress AI stock multiples. The firm nevertheless identifies specific companies whose revenue expansion could offset lower valuations.
Trivariate expects AI-related stock multiples to continue declining because of the interest rate cycle and policy risks.
The firm still wants exposure to AI and lists specific companies where revenue growth could outweigh multiple compression.
Higher rates, data-center opposition, and potential AI-driven job losses are cited as concrete near-term risks to returns.
# The argument in brief
# Why Trivariate expects multiples to decline Trivariate founder Adam Parker links two forces to lower valuations: the interest rate cycle and policy direction on AI. The Federal Reserve recently raised its overnight rate to a 3.75%–4% range after a stronger-than-expected jobs report and an inflation uptick in August. Higher rates tend to reduce valuations for growth-oriented and capital-intensive firms because borrowing costs rise and future earnings are discounted more steeply.
Policy risks add another layer. Multiple states are considering limits on data center construction. A Gallup poll cited by Trivariate finds 71% of Americans oppose new data-center projects in their area. Trivariate also flags potential regulation tied to AI-driven job losses projected for next year. Those policy developments could slow buildout of computing capacity and weigh on stocks tied to that infrastructure.
# Which companies Trivariate still likes and why Trivariate assembled a list of AI-related names where revenue expansion could offset falling multiples. The firm highlights:
Market moves since the note illustrate mixed near-term performance. CoreWeave jumped more than 6% on a day the AI trade outperformed, though it remained down over the prior three months. Oracle gained slightly but had fallen about 19% over six months and trades at a forward P/E of 16.4 versus the S&P 500's 19.3, per FactSet cited in the piece. Marvell and AMD have seen strong year-to-date gains, with Marvell described as having rallied since late August and AMD jumping on the day of the report.
# The practical takeaway for investors
# Immediate risks to monitor
# Bottom line
Stretched earnings expectations, extreme concentration and surging equity issuance point to growing bubble risks.
The concentration of gains in a small group of AI-linked stocks means index-level resilience may be hiding weakness underneath, leaving headline indices exposed if sentiment on AI cracks. On BofA's reading, AI-related earnings, capex updates and any sign of slower spending could become bigger swing factors for US equit
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