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AI technology is not standing still. A lot of the early use was effectively replacing search queries (e.g. “how do I make apple crumble?”). But increasingly, you can upload messy PDF-style documents and ask your AI to make sense of them and then pull out two or three key bits of information (which is extremely helpful in my job). And today’s growth is in agents where you specify a goal and let the technology get on and do it for you. The real-world analogy here is the difference between satellite navigation and a self-driving car.
I mention this because much of the software industry (via Claude code) has effectively become self-driving. This hugely reduces the cost and time involved in writing software. This is, I think, good news for consumers of software but, in today’s market view at least, it is not good news at all for businesses built around them. To illustrate this here are the top and bottom 10 performers for the UK’s FTSE 100 Index year-to-date:
Four of the bottom five here are:
- RELX (-32.1%) which does data analytics and software for legal, medical, and risk professionals.
- Experian (-28.4%) which uses data analytics and software to automate risk assessment and fraud prevention for finance businesses.
- Sage (-26.7%) which sells accounting and HR software.
- Autotrader (-22.1%) a digital marketplace and data platform for the automotive sector.
You do not need to be Detective Columbo to spot the connection. As ever, none of this is meant as financial advice and we are not single stock investors or specialists. Instead, my general point is that investors spent large parts of 2025 worrying whether we are in an AI bubble. In 2026 that looks to have flipped completely. The concern is not that AI is overdone, but that it is arriving and it is arriving fast.
The gap between potential AI winners (including semiconductor manufacturers and energy providers) and the losers (see above for some of them) has widened dramatically in 2026.
If I had a hall of fame of charts, the one below would be in it. It shows you that nearly all the profit growth in the last 15 years has come from technology focussed business. And indeed, for much of the last decade it felt like an overweight to technology was all you really needed to outperform.
That looks to have changed to me. The technology heavy US Nasdaq Index is the worst performing major market we track year-to-date. It is not enough to own technology, you need to own the right technology. We have seen a few high-profile equity investors be caught out by this already in 2026.
he comfort I would give is that you can see from my first chart that the UK FTSE 100 market is still up over 4% for the year so far. And emerging markets continue to outperform. Investors are rotating into businesses where there is either little AI risk or picks and shovel type business models which should continue to benefit as AI grows. The US energy sector is up over 20% for the year for example. There is plenty of diversification available away from AI disruption risks.
Finally, the standard take on technological progress is that we tend to overestimate its impact in the short term but underestimate its impact in the long term. If that is the case, then it is hard to say today’s markets are being short-termist. If your stock is down over 20% on AI risks, then it is probably the longer-term growth and business model risk the market is focussing on.
Chris Brown, CIO
cbrown@ipscap.com
The value of investments may fall as well as rise and you may not get back all capital invested. Past Performance is not a guide to future performance and should not be relied upon. Nothing in this market commentary should be read as or constitutes investment advice.
