An AI ‘reality check’ may take the S&P 500 to 5,000. Here are the trades to make, this strategist says.

Strategist Joachim Klement of Panmure Liberum suggests that a potential "reality check" on artificial-intelligence spending could push the S&P 500 toward the 5,000 level. His argument centers on the idea that current market valuations may embed assumptions about AI-driven earnings growth that have yet to be confirmed by actual corporate results.

The key catalyst to watch, according to Klement, is the upcoming earnings season. Investors will be looking for concrete evidence that heavy AI capital expenditure is translating into revenue and profit gains, rather than remaining a cost burden. If companies fail to demonstrate that link, expectations could reset lower—a dynamic that would weigh on the broad index.

For market participants, the takeaway is less about any single trade than about the importance of earnings verification. The S&P 500's recent strength has been concentrated in a handful of large technology names tied to the AI theme, so any disappointment in AI-related guidance could have an outsized effect on index-level performance. Whether the 5,000 scenario materializes will depend on how corporate commentary reconciles AI spending with near-term financial returns.