Welcome to Soundbites, weekly insights on market trends and investment strategies, brought to you by Investment Executive and powered by Canada Life. For today’s Soundbites, we’re asking Tom Marsico, founder, chairman and CIO with Marsico Capital Management, whether U.S. growth is still in favour. We talked about the scale and durability of the AI buildout and we started by asking how he would characterize U.S. growth stocks in the current moment.
Tom Marsico (TM): What I think is misunderstood is that the growth rate of the S&P earnings over the last five years has mirrored the growth rate of the stock market. So, if we’re looking at what the S&P earnings are for 2026, the stock market today is trading around 21.6 times earnings. And if you look at what the PE is for next year on earnings that we anticipate to be around $381 [per share], it’s trading at 19 times earnings. And the companies that are making up the earnings of the S&P 500 have a higher margin profile than what they had in the past. So, I think that the quality of earnings is actually better today than what we’ve had in the past. I don’t think that the market is expensive here. I think it’s at a reasonable level. If the earnings growth just continues, you’re going to have earnings growing at about 15% to 17% next year. That’s a great return if the multiple just stays where it’s at.
What makes him confident in continued U.S. growth?
TM: If you look at the infrastructure spend just by the five major infrastructure companies —Google, Amazon, Microsoft, Meta and Oracle — that’s going to equal 2.6% of total GDP in the United States. It’s massive. It’s over $700 billion. And then you have the knock-on effect. Every job that’s created in AI is going to create other jobs too. So, the growth of the U.S. economy, I think, is going to stay at pretty solid levels. I think if you talked about the potential of our growth — since our population is not growing very fast — it all has to do with productivity savings. That’s basically where the growth is coming from. It’s coming from productivity.
Where he currently sees the strongest growth acceleration within U.S. equities
TM: Obviously in companies that are helping to build out the infrastructure related to artificial intelligence: OpenAI, Anthropic, Perplexity, Gemini, which is Google’s LLM. The growth rate of Anthropic at the beginning of the year, they were at a run rate of $9 billion dollars. A couple of months ago, they were at $15 billion. And now their run rate is over $30 billion. So, just in a short period here, you’ve seen just absolutely vertical growth in revenues. And I think that this moment is happening to a lot of the large language models as people start to use them more and more in their daily lives and then in business.
Rate sensitivity
TM: I think that the resiliency really is in this area of artificial intelligence. There is going to be a buildout. The companies that are charging ahead are generally not sensitive to smaller changes in longer-term interest rates. If we were to see a big move in rates higher — if the 10-year rate went from 4.25% to 5.25% or 6.25% — the market is not going to do well because you’re discounting those future earnings at a higher interest rate so those earnings would become less valuable. If the war in the Middle East were to become much greater, much more widespread, you would see a lot of spending that would be curtailed because everything would become too expensive. And there would be a real concern about inflation, and having inflation embedded in economic assumptions. That would hurt interest rates. And that would definitely hurt the stock market over a longer period of time.
Concerns about AI-driven job losses
TM: If you look at other times when there’s been a huge change in technology, you know, like, let’s go back to the web and the usage that we’ve gotten from going to a digital economy, basically. There are more people involved and more people working in the digital economy now than there ever were before. It’s called the Jevons Paradox. As the price of something goes lower and lower, the demand or the usage of that product goes higher and higher. I think it’s just a huge productivity savings instrument that we have that’s just going to accelerate the growth in the United States, and, frankly, accelerate the growth globally.
And finally, what’s the bottom line for investors who are thinking about U.S. growth?
TM: I think this area of U.S. growth companies is quite fascinating, actually, right now, with everything that’s going on in artificial intelligence, the buildout of that whole infrastructure, the use of agents going forward, the jobs that are being created, the concern over the jobs that might be lost. I think that all the investments that we’re seeing is going to impact the growth rate of the companies in the S&P500, and frankly, have more of a global impact too. It’s all encompassing, what’s happening. I think the most important thing to watch, as far as U.S. growth is concerned is that with the cost coming down to get information from artificial intelligence, we’re going to use more of it. So, the capital expenditures are going to remain high. I think the companies that provide equipment to those hyperscalers are going to be in favour and grow for a long period of time. I think it’s underestimated how long this timeframe is going to be. First, you need it to accelerate the data, and then you need to treat the data to get the benefits of artificial intelligence from there. This is going to take a long period of time. Another seven to 10 years. It’s not going to grow at the rate that it has been growing at, but it will continue to grow at a fairly good rate. So, this is quite a moment for the United States in particular, and for the world in general.
Well, those are today’s Soundbites, brought to you by Investment Executive and powered by Canada Life. Our thanks again to Tom Marsico of Marsico Capital Management. Visit us at investmentexecutive.com, where you can sign up for our a.m. newsletter and never miss another Soundbite. Thanks for listening.
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