AI Will Kill The Tech Monopolies

Our Global Investment strategists argue that AI threatens the traditional profit engines of large technology firms despite boosting productivity. Tech companies have historically relied on economies of scale, network effects, and proprietary technologies, but AI may erode these advantages. Although productivity growth should strengthen, faster productivity did not translate into higher profits during 1995-2005. AI’s disruption of software may spread to social media, shifting platforms from coveted destinations to mere content repositories. With Tech stocks now representing nearly half of S&P 500 market capitalization, concentration risks are elevated. 

Our colleagues see the biggest winners from AI as owners of scarce factors such as land and natural resources. They also argue that governments will run large budget deficits to support consumption and counter downward pressure on real wages. They estimate a 10% equity market decline would reduce household wealth sufficiently to lower demand by roughly 0.9% of GDP, raising recession risks if investment also weakens. 

However, timing matters. Their MacroQuant model signals near-term upside for equities, so they emphasize the “rotation trade” over the “recession trade.” They maintain their 2026 recommendations: short QQQ/TLT, long RSP/SPY, long EEM/ACWI, and long metals.