Investors are rewarding artificial intelligence exposure over profitability, with unprofitable Russell 2000 companies outperforming profitable peers, according to The Kobeissi Letter.
Companies with negative earnings per share in the Russell 2000 have returned 60% since April 2025, compared with a 38% gain for companies with positive earnings, the market commentator said in a post on X Sunday.
AI Trade Fuels Rally In Riskier Small Caps
The outperformance accelerated in April after investors piled into small-cap technology stocks following an Iran-U.S. ceasefire announced on April 7, according to Kobeissi.
The market commentator said investors have increasingly favored companies tied to the AI theme, even when those businesses remain unprofitable.
