A veteran investor believes that the rally driven by the AI trade is not over, despite numerous calls that 2026 will be the year the market broadens out.
In a new Bloomberg Podcast interview, Margie Patel, senior portfolio manager at Allspring Global Investments, says valuations across leading AI names have begun to normalize following the correction witnessed in Q4 2025.
Patel, who was given the moniker “Queen of Junk Bonds” after delivering high-performing returns in the high-yield junk bond sector, believes that the market is already pricing in slower growth without abandoning the trade altogether.
“I think the artificial intelligence trade is going to continue. But really, over the last few months, we’ve already seen some erosion in the price-earnings ratios of some of the leading companies in AI. So the market is already making an adjustment if we’re looking at some moderation from the extremely high growth, which is probably likely. But still, that says to me that’s going to be one of the sectors.”
When asked whether the other 493 stocks in the S&P 500 could finally catch up to the largest stocks next year, Patel pushes back on the idea of a broad-based rally.
She says leadership is unlikely to rotate meaningfully away from the sectors that have already dominated returns.
“No, I don’t think so. I think the same sectors that have been strong for this year and a couple of years before are going to continue to be strong.”
Patel warns that several consumer-facing areas could struggle, while capital-intensive and infrastructure-linked sectors remain better positioned. She says the winners are likely to stay concentrated in areas directly tied to long-term investment cycles.
“The other sectors that I think, particularly for consumers, may be rather disappointing. So we still think it’ll be technology, industrials, relating to the electrical grid, and those will be the sectors. And aerospace, defense will continue to be the strong sectors and really outperform those other sectors.”
Her comments come amid calls for a broader market rally. Wall Street veteran Ed Yardeni recently downgraded the Mag 7 to underweight, predicting that the capital would rotate to the “Impressive 493,” which are companies that stand to benefit from the adoption of AI.
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