Economists: Tech giants' dominance wanes, opening new opportunities for investors
The Swiss bank Julius Baer estimates that the exclusive dominance of tech giants is nearing its end, and points to new opportunities in Europe and Asia towards the end of 2026.
According to a review conducted by Mathieu Racheter, Head of Equity Strategy Research at Julius Baer, equity returns began to broaden after a first half of 2026 that was unusually concentrated. An improvement in earnings breadth supports this trend and strengthens the case for diversification beyond artificial intelligence while maintaining a positive stance on equities towards the end of the year. The first half of 2026 was dominated by technology, especially semiconductor stocks related to artificial intelligence.
Since July, however, market leadership has broadened beyond technology towards sectors such as financials and healthcare.
"We expect this trend to continue. It is important to note that this is not a negative call on artificial intelligence; the fundamentals of semiconductor companies remain strong and large cloud service providers continue to raise their capital expenditure forecasts," says Racheter.
Instead, an improvement in earnings breadth creates a wider set of opportunities. In the US, the median S&P 500 company is showing earnings growth of around 12%, while Europe is experiencing the broadest cycle of earnings forecast upgrades in three years. Against this backdrop, diversifying beyond the winners of the first half is a key component of our positioning towards the end of the year.
In Europe, economists prefer cyclical sectors exposed to higher investment spending, while financials remain a preferred area. Banks continue to benefit from resilient credit quality, improved loan growth, and strong capital returns.
"In healthcare, we prefer biotechnology and medical technology, where improving fundamentals meet attractive valuations. In information technology, we remain positive on the structural theme of artificial intelligence and prefer semiconductors and selected software companies over hardware, where growth is slowing and higher memory costs are weighing on margins.
We are also starting to warm up to large cloud service providers, as accelerated monetization of artificial intelligence supports revenue growth, valuations have become more attractive, and future moderation in capital expenditure growth may improve the free cash flow outlook after reaching a trough in 2027."
At the same time, the senior official at Julius Baer emphasizes that economists remain overweight in emerging markets, with a special focus on Asia. "While the gains have so far been concentrated in a few markets with high technology weight, solid earnings growth and the potential for closing gaps should support broader participation. Overall, we remain positive on equities towards the end of the year, but we expect the next phase of the rally to rely on a broader mix of sectors and regions."
