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Jefferies Sees AI-Driven IT Earnings Soaring, Warns of Risks
Jefferies says companies that make technology products could have much higher earnings this year.
It expects the IT sector’s earnings to grow by 65.1% in the third quarter of 2026.
Companies that make semiconductors are expected to grow especially quickly.
A lot of this growth is linked to businesses spending money on artificial intelligence.
But Jefferies says investors should ask whether that spending can keep going and whether it will pay off.
The report also points to rising government bond yields.
Higher yields can make investors less willing to pay high prices for company shares.
So strong technology earnings are facing a possible challenge from higher interest rates and questions about AI investment.
Jefferies forecasts 65.1% third-quarter 2026 earnings growth for the IT sector, up from 22.3% a year earlier.
Semiconductors are forecast to lead IT sub-industries with 131.7% earnings growth; semiconductor materials and equipment are forecast at 68.9%.
LSEG I/B/E/S data as of September 25 put expected S&P 500 third-quarter earnings growth at 30.2%, versus 16.1% a year earlier.
Jefferies says investors should question how long AI-related capital spending can continue and whether it will earn adequate returns.
US Treasury yields reached reported highs not seen since 2002, potentially adding pressure to equity valuations.
- Who
- Jefferies, including analyst Chris Wood, and companies in the US IT sector.
- What
- A report forecasts strong IT earnings growth driven by AI investment while warning about the durability and returns of AI spending and rising bond yields.
- Where
- The United States, including the S&P 500 and US Treasury markets.
- When
- The report was dated October 1, 2026; earnings forecasts used data as of September 25.
- Why
- AI-related capital expenditure is supporting earnings, but Jefferies says its duration and returns are uncertain and rising yields may weigh on equity valuations.
Key facts
- Report
- Jefferies GREED & fear report, dated October 1, 2026
- IT earnings forecast
- 65.1% year-on-year growth for the third quarter of 2026, compared with 22.3% a year earlier
- S&P 500 forecast
- 30.2% third-quarter 2026 earnings growth, according to LSEG I/B/E/S data as of September 25
- Semiconductor forecast
- 131.7% earnings growth
- Semiconductor materials and equipment forecast
- 68.9% earnings growth
- Treasury yields cited
- 10-year at 5.34%, 30-year at 5.69%, and two-year at 4.96%
- Key risks identified
- How long AI capital expenditure can continue, whether it will deliver adequate returns, and the implications of rising government bond yields
Quotes
Jefferies report
GREED & fear report discussing investor concerns
“The first, and perhaps most important for equities, is the duration of the AI capex cycle and whether there will be adequate returns from the massive spending. The second is the renewed realisation that G7 government bonds are in a structural bear market and what that means.”
livemint.com
“The stock market has historically done relatively badly going into the mid-terms whereas that has not been the case so far this year, primarily because of the stellar earnings growth driven by the highly earnings-accretive AI capex cycle.”
livemint.com
Chris Wood
Jefferies strategist cited in the GREED & fear report
“The IT sector has the second-highest forecast 3Q26 earnings growth of 65.1%, up from 22.3% last October. All 12 sub-industries in the IT sector have higher forecast earnings than a year ago, with the semiconductor and semiconductor materials & equipment sub-industries having the highest earning growth (131.7% and 68.9%, respectively).”
livemint.com
Sources
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