AI Weariness Shifts Investor Attention to the S&P 500’s Other 493 Stocks

For the past three years, bets on artificial intelligence have been the dominant force shaping U.S. equity markets. Shares tied to the AI boom have surged roughly 78%, driven largely by the so-called Magnificent Seven mega-cap technology leaders that investors viewed as the primary beneficiaries of the AI revolution. But after an extended run that has lifted valuations to historic levels, a growing segment of the market is starting to question whether this winning streak is nearing its end.

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Investor enthusiasm around artificial intelligence has begun to cool, not because the technology lacks promise, but because expectations may have raced too far ahead of reality.

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The assumption that AI would rapidly transform the U.S. economy and unlock extraordinary profit growth across corporate America is now being scrutinized more closely. As doubts mount over how quickly AI can deliver on its boldest promises, optimism has given way to unease, prompting a noticeable shift in market positioning.

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That shift is becoming evident in where money is flowing. Instead of piling into the same handful of AI-heavy stocks, investors are increasingly rotating capital toward the other 493 companies in the S&P 500.

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These firms, many of which were overshadowed during the AI-led rally, are now attracting renewed attention especially businesses that could benefit from a broader acceleration in economic growth rather than reliance on a single technological trend.

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This rotation reflects a growing belief that the next phase of market gains may depend more on traditional economic fundamentals than on transformative narratives. As investors reassess the pace of AI adoption, they are placing greater emphasis on earnings growth, balance-sheet strength, and sensitivity to improving demand conditions. Industrials, financials, and select consumer-oriented companies have begun to look more appealing as expectations build for a steadier expansion in the U.S. economy.

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At the same time, concerns about concentration risk are becoming harder to ignore. The Magnificent Seven account for an outsized share of recent market returns, leaving portfolios heavily exposed to a narrow group of stocks.

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Even modest pullbacks in these names can have an exaggerated impact on major indexes. For investors seeking diversification and risk balance, spreading exposure beyond mega-cap technology is increasingly seen as a prudent move.

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Valuations are another factor driving this shift. Many AI leaders trade at elevated multiples that assume years of flawless execution and sustained growth. While these companies remain dominant players with strong competitive advantages, the bar for future performance is exceptionally high. Any sign of slowing momentum, regulatory pressure, or margin compression could challenge those assumptions and trigger volatility.

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Meanwhile, companies outside the AI spotlight often offer more reasonable valuations and clearer links to economic growth. Firms tied to infrastructure spending, capital investment, and consumer demand may benefit if economic activity picks up as expected. For long-term investors, these areas present opportunities to capture upside without paying premium prices associated with AI hype.

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Importantly, this change in market behavior does not signal the end of artificial intelligence as a powerful force in investing. AI is still expected to reshape industries over time, from healthcare and manufacturing to finance and logistics.

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However, the market appears to be transitioning from blind optimism to a more measured approach that distinguishes between long-term potential and near-term profitability.

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In this environment, selectivity matters more than ever. Investors are becoming more discerning, favoring companies that can demonstrate tangible AI-driven revenue growth rather than abstract future benefits. At the same time, they are increasingly open to opportunities outside the tech sector that may have been overlooked during the AI frenzy.

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As 2026 unfolds, the U.S. equity market may be entering a period defined less by a single dominant theme and more by balance and breadth. If economic growth firms up and earnings broaden beyond a handful of tech giants, the stage could be set for a more diversified rally. For investors, adapting to this evolving landscape may prove just as important as recognizing the power of artificial intelligence itself.

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