The old stock market saying has proven pertinent once again. This is not necessarily the case across all assets (the mighty FTSE 100 hit new highs in July), but some markets have certainly cut up rough over the summer. One senses that as autumn approaches, we are entering a new phase of markets and that the AI chip mania that we saw in Q2 2026 is entering a new and more nuanced phase.

The AI Chip Rally Faces Its First Major Test

The sharp sell-off in semiconductor stocks seen in July bought an abrupt end to what has been a spectacular run-up in these stocks. It remains to be seen if this is a short-lived “correction” or the beginning of a longer-lasting trend. What the last few weeks has revealed, is the extent to which speculators had been drawn into this space, from Korean retail punters to the unfortunately named Situational Awareness hedge fund that was gutted last week by margin calls on their geared positions in AI stocks.

A Broader Market Recovery Emerges

The flip side of this volatility in Tech stocks during July is that we have seen some steady returns in other sectors, leading to a broadening of market returns that has favoured active investors. This chart shows how the S&P 500 Equal Weighted Index has not only caught up with the tech-heavy S&P 500 Index in 2026 but is now outperforming it.

Patience Will Determine AI's Long-Term Winners

More “traditional” sectors such as Financials, Consumer Staples and Healthcare have all had a good summer. Financial companies tend to benefit from higher interest rates and the recent round of big bank earnings demonstrated just how profitable the likes of Bank of America and JPMorgan are in this environment. Similarly compelling from an investment perspective is that we are seeing momentum return to areas of the market, such as the Healthcare and Staples space, that have been shunned in recent years in favour of racier AI-related returns. We view progress in AI as not only benefiting the producers, but also the users of this technology. Businesses that can effectively and securely utilise AI will be more efficient, more innovative and better with managing their customers, regardless of their sector. As with every technological development in recent years, patience is a virtue and we, as investors, must not expect the benefits to accrue in year one – after all, the Wright brothers first took to the air in 1903 but it was another 20 years before commercial airlines really got going. It is not a perfect analogy, but hopefully gets our point gets across.
 

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note that the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.