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Beyond Big Tech

Over the past three years, the tech sector has surged by approximately 300%, driven largely by major players and substantial investment in artificial intelligence (AI). Yet as valuations reach historically high levels, investors and strategists alike are questioning whether Big Tech can continue to justify such lofty multiples. This has prompted growing interest in diversifying portfolios and exploring opportunities beyond the so-called “Magnificent Seven.”

Many strategists anticipate a significant sector rotation in 2026. Early signals are already apparent: elevated tech valuations are tempering investor enthusiasm, while capital is beginning to flow toward undervalued cyclicals, small-cap stocks, and economically sensitive sectors positioned to benefit from broader growth this year.

Two sectors that we find particularly compelling are:

Power & Utilities

US electricity demand has experienced an unexpected surge, exceeding assumptions in many utility plans. AI workloads, electrification across transportation and industry, and other structural trends are driving growth. Deloitte forecasts that peak demand could rise approximately 26% by 2035, creating both operational challenges and investment opportunities for power providers. These dynamics position the sector for potential long-term growth as the economy increasingly relies on reliable and scalable electricity infrastructure.

Industrials

Industrial stocks face some near-term challenges from a slowing US manufacturing sector and a soft housing market. However, opportunities exist within specialised segments. Companies producing heavy electrical equipment, such as large gas turbines for data centres, stand to gain from the surge in electricity demand driven by AI adoption. Analysts at Goldman Sachs project industrial earnings growth to accelerate from 4% in 2025 to 15% in 2026, underscoring the sector’s potential for recovery and expansion.

While technology continues to drive innovation and returns, investors may find that the so-called “boring” sectors offer meaningful opportunities in the year ahead. We find that diversification into these areas could provide a strategic balance between growth potential and resilience in an evolving market landscape.

Over the past three years, the tech sector has surged by approximately 300%, driven largely by major players and substantial investment in artificial intelligence (AI). Yet as valuations reach historically high levels, investors and strategists alike are questioning whether Big Tech can continue to justify such lofty multiples. This has prompted growing interest in diversifying portfolios and exploring opportunities beyond the so-called “Magnificent Seven.”

Many strategists anticipate a significant sector rotation in 2026. Early signals are already apparent: elevated tech valuations are tempering investor enthusiasm, while capital is beginning to flow toward undervalued cyclicals, small-cap stocks, and economically sensitive sectors positioned to benefit from broader growth this year.

Two sectors that we find particularly compelling are:

Power & Utilities

US electricity demand has experienced an unexpected surge, exceeding assumptions in many utility plans. AI workloads, electrification across transportation and industry, and other structural trends are driving growth. Deloitte forecasts that peak demand could rise approximately 26% by 2035, creating both operational challenges and investment opportunities for power providers. These dynamics position the sector for potential long-term growth as the economy increasingly relies on reliable and scalable electricity infrastructure.

Industrials

Industrial stocks face some near-term challenges from a slowing US manufacturing sector and a soft housing market. However, opportunities exist within specialised segments. Companies producing heavy electrical equipment, such as large gas turbines for data centres, stand to gain from the surge in electricity demand driven by AI adoption. Analysts at Goldman Sachs project industrial earnings growth to accelerate from 4% in 2025 to 15% in 2026, underscoring the sector’s potential for recovery and expansion.

While technology continues to drive innovation and returns, investors may find that the so-called “boring” sectors offer meaningful opportunities in the year ahead. We find that diversification into these areas could provide a strategic balance between growth potential and resilience in an evolving market landscape.