US large-cap outlook: Strong earnings and AI scrutiny

Strong earnings support US large-cap equities, but investors should become more selective as scrutiny of AI spending increases.

• With most of the S&P 500 having reported second-quarter results, blended year-over-year earnings growth exceeded 50%.
• The positive earnings surprise rate reached 86%, above the five-year average of 78% and the 10-year average of 77%; 10 of 11 sectors exceeded their longer-term surprise-rate averages.
• These results support Natixis's overweight positioning in US large-cap equities, although strong earnings have not produced equally positive market reactions.
• Investors have responded cautiously to Meta, Alphabet and Oracle, while forward valuation premiums for some hyperscalers have narrowed toward the broader S&P 500.
• A two-standard-deviation rise in the 10-year Treasury yield, credit spreads near cycle tights, Middle East tensions and US midterm-election seasonality could limit the market's response to positive earnings.

Takeaway: Large-cap fundamentals remain supportive, but the next phase may favor companies that can demonstrate durable AI-related returns above their cost of capital rather than broad exposure to the hyperscaler group.