It’s Time to Reduce Your Equity Market Risk | Warren Pies

Pies views the roughly $105 billion combined ARR reported for Anthropic and OpenAI—about $10 billion below his prior estimate—as important evidence for assessing whether AI revenue can support future IPOs, infrastructure spending, and external capital inflows. He says the next durable equity-market leg requires hyperscalers and semiconductor companies to rise together, backed by credible cloud revenue and GPU rental economics.

Pies argues that AI's political risk extends beyond technology performance: potential intervention could slow data-center construction, while weak public messaging and distrust of figures such as Sam Altman and Elon Musk may erode support. He expects AI companies to highlight near-term healthcare and drug-development successes to demonstrate tangible benefits and improve public opinion.

Pies sees a possible September Fed hike as underpriced after hike odds fell from 75% to 30% and recovered to roughly 42%, especially with oil above $90, elevated CPI and PPI nowcasts, and an upcoming PCE report. He argues that a hike could initially lift long-term yields through the yield curve and term premium, while the 10-year yield would need to move materially above 4.7% to meaningfully slow the economy.

Pies identifies August 15 through October 15 as a concentrated risk window because unfavorable seasonals, market structure, and macro events—including Jackson Hole, the Fed meeting, AI-related IPOs, and the midterm elections—may not be fully priced. Consistent with that caution, his firm reduced equity risk around 7,800 to neutral rather than making an outright bearish call, while noting that earnings support remains constructive.

Pies says equities are shifting from an earnings-driven phase back toward macro risk after investors extrapolated strong results into 2027 and 2028, with correlations rising less than expected during earnings season. He also cautions that broad market participation does not by itself confirm a durable advance, since unusually broad gains occurred during the 2000–2002 bear market and technology—roughly half of the S&P 500—must eventually reassert leadership.