Investors Ride AI Boom as Tech Giants Push Markets to Record Highs: Northwestern Mutual

Investors’ optimism shows little sign of fading as another strong earnings season propels major technology companies to record valuations, according to Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company.

“Investors can hardly be blamed for their bullishness as another banner earnings season pushes tech giants to new heights,” Schutte said, noting that artificial intelligence (AI) remains the key driver of market momentum. 

Nvidia last week became the world’s first $5 trillion company amid soaring demand for its AI chips, while Microsoft surpassed the $4 trillion mark following an expanded stake in OpenAI.

Despite these milestones, Schutte cautioned that valuations have climbed to historically high levels. 

The CIO noted that Shiller Cyclically Adjusted P/E ratio recently reached 40.8, the second-highest reading since 1871, underscoring concerns about potential overheating in an increasingly narrow market dominated by AI leaders such as the “Magnificent Seven.”

Still, Schutte rejected suggestions that markets are in bubble territory, comparing the current cycle to the 1990s dot-com era, when transformative technology eventually spread across the economy. 

“We believe the technological outperformance driving today’s later-cycle economy will eventually permeate other sectors,” he said, pointing to companies like Caterpillar, which has reached record highs by meeting surging data-centre demand.

As AI’s impact broadens beyond Silicon Valley, Schutte advised investors to stay diversified. 

“Diversification is the best path to capturing a wide range of outcomes, whatever the future holds,” he said.