The recent bull market has been fueled by the rapid adoption and innovation of artificial intelligence (AI) technologies. However, Goldman’s Privorotsky suggests that a potentially constructive setup for equities exists despite the AI infrastructure unwind. The Democratic sweep in the midterm elections raises regulatory risks, but a shift towards more moderate policies could prevent outright restrictions on data center expansion.

Meanwhile, AI infrastructure valuations have compressed, hedge fund exposure is low, and selling has been extreme. While weakness remains concentrated in crowded growth trades rather than spreading across the broader market, improving breadth, lower oil prices, stable interest rates, and volatility compression support a gradual grind higher.

Despite the AI trade taking time to recover, the macro backdrop remains supportive for equities. With the midterms behind us and potential easing of Middle East tensions, the outlook for the market remains positive. While AI may no longer be leading the charge, equities can continue rallying without a hitch.

In conclusion, while the AI trade may take a breather, the fundamentals of the market remain strong. With a supportive macro environment and improving breadth, equities can continue to rally without AI leading the charge. So, stay optimistic and keep your fingers crossed for a continued bullish trend.