AI, Market Volatility, and the Challenge of Pricing Disruption

If the past couple of years have taught us anything, it’s that AI is no longer just a story about capital spending or productivity tools layered onto existing businesses. It is increasingly reshaping business models, competitive dynamics, and profit pools across the economy.

Hyperscale cloud providers are now expected to invest more than $500 billion in capital expenditures in 2026, while the seven largest technology companies account for more than 30% of the S&P 500’s market capitalization and roughly one-quarter of its earnings.

Capex estimates for 2026 have been revised higher Consensus capex estimates for AI hyperscalers

Positioning Your Investments for a Volatile Market

“Don’t put all your eggs in one basket.” It’s a classic proverb, and for good reasons. Diversifying your portfolio is one the most basic pieces of investing advice—but unfortunately, it’s also advice that too many investors ignore.

Zacks Advantage would like to help you ensure that your investments are properly diversified so that you can avoid the risks of over-concentration in any particular asset class. That’s why we’re offering our free guide, Is Your Investment Portfolio Actually Well-Diversified? ²

Act now to get the basics of diversification, including:

• Why the average investor’s returns lag behind almost every investment category
• 4 myths of a diversified portfolio
• How to create a truly well-diversified portfolio

Learn more with our free guide, Is Your Investment Portfolio Actually Well-Diversified? ²

The market rally of the past couple of years has seemed to reflect investor enthusiasm in prices, but recent volatility suggests investors are wrestling with how disruptive this next phase of AI could be.

One reason for the unease is that AI is evolving beyond its original role as a productivity enhancer. Increasingly, AI models are beginning to function more like operating systems, which are autonomous systems capable of accessing tools, reasoning across tasks, and executing outcomes with limited human intervention. This shift has major implications for the software sector, which has traditionally relied on human users interacting with discrete applications.

Recent product releases from AI developers brought that risk into sharp focus. The big news recently was advances in Anthropic’s “Claude” model, which has essentially sent software stocks into a bear market. The new tools proved capable of automating tasks such as legal review, coding, compliance, and data aggregation. What were once viewed as AI beneficiaries now look extremely vulnerable to displacement. For its part, the market began pricing in the possibility that AI could bypass entire layers of the traditional software stack.

At the same time, corporate users of AI are already seeing tangible benefits. Companies adopting AI tools are posting margin expansion that outpaces non-adopters, signaling that productivity gains are real even if the ultimate winners are not always obvious. As past technology cycles have shown, disruption rarely follows a straight line. The dot-com era brought excessive investment and painful repricing, yet the internet ultimately reshaped the global economy. AI appears to be following a similar path: rapid innovation, heightened volatility, and uneven market reactions, with lasting structural change underneath.

Bottom Line for Investors

For investors, there’s an interesting mix to consider. AI’s long-term promise remains powerful, but short-term uncertainty around who captures value is colliding with elevated concentration and correlation within equity indices. As AI capabilities continue to leapfrog expectations, or fall short of expectations, bouts of volatility are likely to persist. Some business models may face pressure, while others like large-cap leaders and infrastructure providers are better positioned to monetize the transition over time.

For investors, the challenge is in navigating how leadership shifts as AI disruption accelerates. In an environment like this, rather than anchoring portfolios to a single narrative or sector, a tactical, actively managed approach allows investors to adjust exposure as volatility, correlations, and leadership evolve. When innovation is moving faster than markets can digest, adaptability can be just as important as conviction.

Most investors can get where they need to go over the long term by owning a diversified portfolio of stocks and/or ETFs. In fact, “diversify your portfolio” is one the most basic pieces of investing advice. Sadly, in our experience many investors still put all (or most) of their eggs in one basket.

At Zacks Advantage, we strive to help every investor properly allocate their assets. In fact, we’ve put together a helpful guide to help you understand the basics of portfolio diversification, including:

• 4 myths of a properly diversified portfolio
• Why the average investor’s returns trail almost every other investment category
• How to create a truly well-diversified portfolio

Get our free guide, Is Your Investment Portfolio Actually Well-Diversified? ³, to learn how to create a truly diversified portfolio.

Download our FREE Guide³

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¹ Goldman Sachs. January 22, 2026.

² Zacks Investment Management may amend or rescind the Is Your Investment Portfolio Actually Well-Diversified? guide offer for any reason and at Zacks Investment Management’s discretion.

³ Zacks Investment Management may amend or rescind the Is Your Investment Portfolio Actually Well-Diversified? guide offer for any reason and at Zacks Investment Management’s discretion.

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