Fed's Mary Daly has blunt message for AI stock investors

Fed's Mary Daly has blunt message for AI stock investors Moz Farooque Sun, June 7, 2026 at 2:13 AM GMT+7 4 min read MU NVDA Mary Daly just issued a stark warning to AI stock investors in a recent sit-down interview with Bloomberg. Daly argues that the broader story remains promising, but clearly the proof is still incomplete. The San Francisco Fed president laid out the case that businesses are clearly spending, experimenting, and preparing their workers for the AI boom. However, for those expecting the sweeping productivity gains that Nvidia CEO Jensen Huang has promised, those benefits have yet to materialize. That’s why Daly points to 2027 being a litmus test. Despite being mostly constructive, the Fed official is still separating possibility from evidence. Markets are still rewarding the biggest in the AI space, especially those that are funding the buildout. For context, Micron Technology, once considered a classic boom-and-bust memory stock, recently topped a $1 trillion valuation after soaring 780% in just nine months. At the same time, Micron stock is now trading at more than 45 times non-GAAP earnings, 161% above its 5-year average, according to Seeking Alpha. Similarly, Nvidia stock is trading at over 37 times earnings, leaving little room for disappointment. Essentially, it boils down to a simple question: whether AI can move from flashy experiments to genuine economic impact. The Magnificent 7, which includes Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla, makes up a whopping up 34.8% of the S&P 500 in May 2026, up from 12.5% in 2016, according to The Motley Fool. In 2025, the group accounted for over 40% of the S&P 500’s return, underscoring how much the index's performance depends on a handful of AI-linked names, according to Fidelity. According to a Reuters report, the AI rally remains as powerful as ever, with Nvidia and Microsoft alone adding $591 billion in market value in May on the back of robust AI-chip demand and upbeat earnings. Big Tech’s tremendous AI spending matched its market weight, with Amazon, Microsoft, Meta, and Google-parent Alphabet planning capital expenditures of up to $725 billion in 2026, according to Business Insider. Daly’s core point is that the AI boom still has a long way to go to earn the market’s trust. Ernst & Young drops stunning take on economy as oil jumps Treasure secretary delivers surprise take on the economy Powell sends message on U.S. economy and AI-related job loss fear She talks about how businesses are spending and experimenting aggressively, but broad productivity gains haven't yet shown up across the economy. Daly explained, “I think that's really the place. We haven't seen widespread productivity gains yet. The ROI is still to be developed, but I'm definitely seeing the enthusiasm, and it's picked up tremendously in the last year.” For AI stock investors, that matters a great deal because many of the sector's top stocks have already priced in what appears to be an exceptionally optimistic future. What’s encouraging, though, is that she argues that small, medium, and large companies are using AI across back-office work, front-office operations, agriculture, manufacturing, and services. That’s why she calls next year a litmus test for AI, especially if businesses can efficiently redesign their operations around the technology. If AI becomes a tremendous productivity engine, the bull case for most of the AI stocks gets stronger. On the flip side, if we see adoption remaining scattered, it would suggest the market may be moving more quickly than the economy. Daly also pushed back on the idea that the rising AI stock market is automatically creating a financial-stability problem. She argued that the bulk of the spending is coming from the Magnificent Seven, companies with fortress-like balance sheets capable of funding massive AI investments. She also downplayed concerns about market volatility, saying the real risk comes when it spreads to banks, consumers, and businesses. Nevertheless, she is still closely watching the AI buildout. Daly believes that the tremendous data-center boom may create near-term inflationary pressures, as these projects require tons of electricity, generators, and infrastructure equipment. However, she frames it more as a timing issue. “But what they're building creates the infrastructure, the data centers create the infrastructure, or if the big guys come in, as you just said, and help with electrical plants that help with electricity generation, that eventually can help with the prices of those things.” Hence, new data centers and power investments will help bring costs down substantially, even if the buildout initially leads to bottlenecks. Daly also discussed the labor market, sharing her take on how businesses are becoming cautiously optimistic, but aren’t really rushing to hire. The latest jobs report showed the unemployment rate hovering at 4.3%, with labor-force participa

Fed's Mary Daly has blunt message for AI stock investors

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