Sid Choraria of SC Marwar Capital said the market rally is being driven by AI investment and strong earnings growth, but cautioned that valuations are becoming "a little rich" as investors price in future gains.

AI Boom And Future-Focused Markets

Choraria told CNBC on Friday that investors should not "get caught up in the noise," noting that markets tend to look ahead despite geopolitical shocks.

He highlighted massive AI spending—about $800 billion in data center infrastructure by the largest technology companies, including Amazon.com Inc. (NASDAQ:AMZN), Microsoft Corp. (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOGL) Google, and Meta Platforms Inc. (NASDAQ:META)—in a single year as a key driver, calling it one of the largest build-outs in history.

He also pointed to rising interest around potential major IPOs such as Anthropic, SpaceX, and OpenAI, as well as global competition, as factors keeping investor focus on the AI theme.

Earnings Growth Supports Market Strength

He identified earnings growth as the second major driver, noting that S&P 500 companies generated about $2.1 trillion in profits last year and roughly $3 trillion in operating cash flow.

He compared this with about $1.2 trillion in profits in 2019 and around $600 billion in 2009, showing a sharp rise over time.

Choraria said that this growth justified investor optimism, with capital flowing into sectors like chips and oil, where earnings are expected to expand further, supported in part by strong bank profits.

Market leaders have reflected this surge. NVIDIA Corp. (NASDAQ:NVDA) surpassed a $4 trillion market capitalization by July 2025 and reached $5 trillion by October 2025, while Broadcom Inc. (NASDAQ:AVGO) crossed the $1 trillion mark in December 2024.

Valuations Reflect High Expectations

Choraria said investors are paying a premium for this growth, pushing valuations higher. He noted that sectors such as semiconductor stocks have performed strongly as investors bet on future earnings.

Still, he agreed that valuations are now "a little rich," raising questions about how much future growth is already priced in.

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