After years of dominance by the biggest technology stocks, Goldman Sachs says that 2026 will be the year when stocks crown a new winner.
In a video update, Mike Washington, equities sales trader in Global Banking & Markets at Goldman Sachs, says the long-running outperformance of the Magnificent Seven has started to reverse in 2026.
“In the last three years, the Magnificent 7 has massively outperformed the broader S&P 500 index. But so far in 2026, we’ve actually seen that trend reverse, and S&P equal weight has outperformed the tech-heavy S&P 500 index.”
He says the shift reflects a change in investor sentiment toward the broader economy.
“So therein lies the question, why? While investors are turning more optimistic on the US economy and turning to more cyclically exposed sectors like financials, industrials, and some pockets of consumer, these companies would be huge beneficiaries of the accelerated growth that’s expected throughout the first half of this year.”
Washington also points to growing scrutiny around the tech giants’ spending plans.
“At the same time, the Mag 7’s significant capex spend on AI, and the fact that they’ve been tapping into debt markets to fund some of this capex spend is finally starting to become a concern for investors.”
Washington also flags crowded positioning in the AI trade, suggesting that it would be very difficult to push the Mag 7 names higher.
“Not to mention, positioning across the Mag 7 trade is at all-time highs, which suggests that the incremental buyer might not have much dry powder left. So I expect Mag 7 to keep underperforming and S&P equal weight to be the big winner this year.”
Just last week, Big Tech announced $655 billion in AI spend for 2026, led by Amazon and Google. According to Wall Street veteran Ed Yardeni, Big Tech’s efforts to develop AI will ultimately benefit the other 493 stocks in the S&P 500, putting them in a solid position to outperform.
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