AI Spending and Economic Resilience Fuel Market Shift, Squeezing Short Sellers

The U.S. stock market has undergone a tectonic shift in recent months, leaving bearish investors nursing losses. What began as a narrow tech rally has morphed into a broad-based advance, powered by surging AI investments and unexpected economic strength. This dual engine is rewriting market playbooks and punishing those betting against equities.

Federal Reserve policy expectations are adding fuel to the fire. Softer inflation data and labor market stability have markets pricing in potential rate cuts, breathing new life into growth assets. Long-duration plays—particularly those tied to future earnings—are back in vogue as financial conditions appear set to ease.

At the epicenter stands artificial intelligence. Corporations racing to automate and digitize operations have turned AI infrastructure into a market-moving force. Mega-cap tech firms continue leading index gains, with their sprawling supply chains—from chipmakers to cloud providers—riding the coattails of this transformative spending.