Analysts See AI Rally Resuming in Chips, But Warn of S&P 500 Pullback and Software Disruption

Analysts are forecasting a resumption of the AI-driven market rally, particularly in the semiconductor space, but are warning of a significant S&P 500 pullback by late 2027. The latest research also highlights the disruptive impact of artificial intelligence, with notable downgrades for software and freelance marketplace stocks whose business models face increasing pressure.

Bullish Calls on AI Hardware and Memory

Optimism in the AI hardware sector remains strong, bolstered by massive new partnership announcements. Analysts at Bernstein reiterated their bullish stance on memory chipmakers after SK Hynix and Nvidia signed letters of intent for a partnership worth over $500 billion, while Samsung and Broadcom announced a $200 billion memorandum of understanding for memory and foundry services.

Bernstein noted these deals underscore memory's growing importance to AI infrastructure and the need for tech giants to secure long-term supply. This sentiment was echoed by UBS, which initiated coverage on SK Hynix with a Buy rating and a $204 price target. UBS argues the market is underpricing the structurally higher profitability in the memory sector, expecting AI to accelerate DRAM bit demand growth to 36% year-over-year in 2027.

Market Rally Faces Long-Term Headwinds

Despite near-term optimism, some strategists see trouble on the horizon for the broader market. Capital Economics told clients it expects the recent selloff in AI-linked stocks to be temporary and for the rally to resume, maintaining an end-2026 S&P 500 forecast of 8,250.

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However, the firm warned that current earnings expectations look "exceptionally optimistic" over the long term. It forecasts that as these expectations are scaled back, the S&P 500 could fall to 6,500 by the end of 2027, signaling a significant potential pullback for the benchmark index.

AI's Disruptive Force Hits Software and Services

While hardware makers are poised to benefit, some software and service companies are facing downgrades as analysts weigh the negative impacts of AI. TD Cowen downgraded Intuit to Hold from Buy, cutting its price target to $304 from $504. The firm cited a challenging near-term outlook, execution risks related to Intuit's AI product strategy, and rising competition.

Similarly, freelance marketplace Fiverr was downgraded by both Oppenheimer and Goldman Sachs after slashing its full-year guidance. Oppenheimer noted that pressure from large language model adoption accelerated during the quarter, with Fiverr cutting its full-year revenue and EBITDA guidance by 9% and 21%, respectively. With annual active buyers down 22%, analysts see a difficult path to recovery as AI compresses demand for lower-cost creative services.