AI in Focus in 2026, Traders Look Past LLMs

Tech & AI Outlook - Tech sector is expected to perform well in the coming year, with a setup similar to the previous year, driven by factors like Fed rate cuts and a strong economy [1][2] - AI is anticipated to be a tailwind, fostering growth in tech and other sectors [2] - AI use cases are expanding across various sectors, including tech, consumer, and financials, indicating its potential to become ubiquitous [3][4] - Companies need to continue investing in AI and demonstrate beneficial returns to sustain spending [4] - The market is discerning about AI investments, focusing on cash flow and returns, suggesting a healthy investment environment [10][11] Labor Market Impact - The extent to which job cuts are directly related to AI is currently uncertain [6] - There may be a period of workforce digestion due to AI, but in the long term, it is expected to be a net positive for jobs [6][7] Investment Strategy - Positive outlook on infrastructure spending, particularly on hyperscalers and electrical equipment companies involved in physical infrastructure for AI [8] - Focus on technology companies that enable AI scalability, deployment, and security, such as Palo Alto Networks and MongoDB [8][9] - Companies that help clean up and prepare data for AI are also considered promising [9] - US market remains favorable due to stronger growth and corporate earnings compared to other global regions [15][16]