“This is a truly game-changing technology that will reshape the global economy in the years ahead,” the bank says. On a day when Nvidia delivered blockbuster earnings and guidance, our call of the day argues that investors have officially crossed the point of no return with AI — and that nothing matters more heading into 2026 and beyond. “AI will be the most important macro force in 2026, as traditional drivers like monetary and trade policy fade,” writes Ajay Rajadhyaksha, global chairman of research at Barclays, in the bank’s 2026 outlook, “As Goes AI.” Rajadhyaksha says fears of the AI boom collapsing are overblown and expects the economic expansion to roll on for another year. Barclays has even raised its S&P 500 forecast for 2026 to 7400, up from 7000. Recent market hiccups have stemmed from worries that AI companies may not deliver on massive tech spending, alongside fading hopes for one final Fed rate cut this year. But Rajadhyaksha stresses how real AI’s economic impact already is: roughly 1% of U.S. growth in 2025 came from AI-related investment — from data centers to telecom upgrades and construction. “The scale of this build-out will likely dwarf the telecom boom. The U.S. is in the middle of its largest capex cycle in decades,” he says. AI has also been a powerful engine for investor wealth. Since the end of 2022, AI-linked stocks have driven 75% to 80% of the S&P 500’s earnings and overall performance — even as consumers grapple with trade concerns, job worries and a tough housing market. “Strong wealth gains from AI-sensitive equities are a big reason why. AI spending has fueled investment, and AI stocks have fueled consumption,” Rajadhyaksha notes. The biggest risk? The AI revolution losing steam. With U.S. households holding $45–$47 trillion in equities, a 30% drop in valuations could wipe out about $15 trillion — crushing consumer spending, stalling AI investment, and potentially pushing the economy into recession. Still, Barclays sees the analogy to the dot-com bust as overstated. Markets have recovered from every AI scare — including DeepSeek — and hyperscalers continue to show strong margins as real use cases multiply. Barclays forecasts 2.1% U.S. growth next year, helped by fading tariff drags and fresh fiscal support from the One Big Beautiful Bill. They do not expect large AI-driven job losses; instead, they see productivity gains driving the next year of growth. So how should investors position for the AI era?Barclays is turning positive on the entire technology, media and telecom sector, citing secular AI-driven growth, heavy capex, and double-digit gains in cloud and digital advertising. Other themes they favor include: Sectors likely to lag the S&P 500: consumer, commodity-linked and healthcare, due to firm inflation, oversupply and regulatory pressure. Style-wise, Barclays favors growth over value, driven by tech-led earnings strength. They also recommend exposure to 2-year Treasurys, expecting Fed cuts to remain in play. Internationally, Chile, Peru, Australia and South Africa stand to gain from rising demand for metals and critical minerals powering the AI boom.

SoFi’s Liz Thomas Says a Surprise Sector Could Shine in 2025 Investor anxiety keeps building as the year winds down, with Monday’s selloff showing no appetite for dip-buying. Concerns over AI and fading hopes for more Fed rate cuts continue to shake the market. AI has been the go-to trade for 2025, but SoFi’s head of investment strategy Liz Thomas argues it may be time to look beyond tech. Her contrarian pick? Healthcare — a sector she believes could turn into a standout performer through 2025 and even into 2026. Thomas admits the call looked risky at first. With HHS Secretary Robert F. Kennedy Jr. taking office and pushing early policy changes, the sector was bracing for impact and had a tough year. “It was definitely a contrarian choice going into 2025,” she told MarketWatch. “The sector was pricing in a lot of fear.” But she still expects a strong catch-up trade, pointing out that healthcare could quickly close the gap with — or even overtake — industrials. Recent performance supports her case: healthcare has jumped from being one of the year’s laggards to outperforming financials. The XLV ETF is now up around 10% in 2024, compared with a little over 6% for XLF. Thomas says investors rotating out of pricey tech names are hunting for growth that doesn’t come with stretched valuations. “Earlier this year, healthcare was in the bottom percentile of valuations versus the S&P 500. It doesn’t get much cheaper than that,” she said. Pharma and biotech, in particular, are showing a promising mix of value and growth — something Thomas says could make healthcare a repeat pick for 2026 as SoFi finalizes its outlook. She also notes the sector tends to perform well in midterm election years, adding to its defensive appeal for 2026. Heading into 2025, SoFi was broadly optimistic but cautious about two risks: inflation heating back up and AI falling short on monetization. Neither issue has surfaced yet, though Thomas still sees potential cracks in the AI trade. One prediction that hasn’t hit: software beating semiconductors. Even so, she believes a rotation could still happen. “As tech investors become more valuation-conscious, software could be the next gateway that brings AI into real-world use,” she said. After Monday’s nearly 800-point drop in the Dow, Thomas thinks excess speculation is finally being flushed out — especially in momentum pockets. Still, she expects a late-year chase as fund managers try to catch up. Her warning: “Everyone thinks they’ll exit before a crash. You never know when it comes, but when stocks get this stretched, a reality check usually follows.”