Don't want to chase high AI? These "low-key" assets may be more stable in 2026

Helen Jewell, Chief Investment Officer of BlackRock, Inc.'s Fundamental Equities team, stated that as artificial intelligence (AI) continues to drive up the valuations of tech giants, for stock investors looking to position themselves steadily in 2026, expanding investment horizons beyond the AI hype may be a wise new year investment plan - as opportunities may be lurking in plain sight. Currently, U.S. stock market valuations are very high, with the Schiller price-to-earnings ratio of the S&P 500 index surpassing 40 times, approaching the levels seen during the dot-com bubble of the 1990s. At the same time, market concentration has reached astonishing levels. According to analysis by Goldman Sachs Group, Inc., the total market value of the top five tech giants in the U.S. - NVIDIA Corporation(NVDA.US), Apple Inc.(AAPL.US), Alphabet Inc. Class C(GOOGL.US), Microsoft Corporation(MSFT.US), and Amazon.com, Inc.(AMZN.US) - has exceeded the market value of the Euro Stoxx 50 Index, as well as the market values of the stock markets of the UK, India, Japan, and Canada combined. In this context, doubts about the quality of this year's AI-driven rally in the market have begun to surface, and the Cboe Global Markets Inc volatility index (VIX) has seen a significant increase in the past few months. However, even so, in 2025, many markets and industry sectors outside the U.S. technology sector still achieved steady returns - and Jewell believes that many of these assets are likely to continue this positive trend next year. Moving away from the U.S. market From a geographical perspective, in 2025, the main stage of the global stock market is not the U.S. Based on returns in local currency, as of early December, the world's largest stock market has fallen to 20th place in the rankings of various countries' stock markets, with South Korea and Spain topping the list. Jewell stated that investors can achieve double-digit returns without being limited to the U.S. market. According to data from Goldman Sachs Group, Inc., over the past 12 months, stock markets in 84% of countries globally have seen gains over 10%. International stock markets are expected to continue their excellent performance next year. Jewell believes that the European stock market may benefit from the revival of economic activity. The loan growth rate in the Eurozone has steadily rebounded, and the Composite Purchasing Managers' Index (PMI) is well above the 50 boom-bust line, signaling clear economic expansion. By 2026, Germany's fiscal stimulus policy and the overall increase in defense spending in Europe are expected to further inject strong momentum into this cyclical economic expansion. These favorable factors will provide support for cyclical businesses in Europe, such as truck and mining equipment manufacturers. And if the Euro stabilizes against the U.S. Dollar next year, the performance of these companies may reach new heights. As for the Japanese market, the dual effects of benign inflation and corporate transformation - many companies are focusing on streamlining businesses and focusing on core areas - are expected to continue to drive improvements in corporate profitability in 2026, thereby increasing shareholder returns. In addition, the Japanese House of Representatives has just passed a supplementary budget of $117 billion, providing funding for large-scale fiscal stimulus, which will provide strong support for the overall economy. It is worth noting that Japan may be the only major economy to raise interest rates in 2026. While this move may constrain economic growth to some extent, it favors the development of the banking industry and is not expected to significantly hinder overall economic growth. In the emerging markets sector, with the weakening U.S. Dollar, global interest rates declining, and the acceleration of global supply chain restructuring to adapt to trade frictions and political conflicts, funds and investments continue to flow in, providing solid support for the profitability of emerging market companies. Lastly, since the beginning of this year, the UK stock market has outperformed the U.S. stock market even without the help of top AI concept stocks. Jewell said that the current valuation of the UK stock market is among the lowest in developed countries and is expected to provide stable investment returns in the future. The challenge for investors is to identify those quality UK companies that can break through the negative sentiment engulfing the market. Moving beyond the tech sector Similar logic also applies at the industry level. Over the past five years, when measured in local currency, the performance of the European banking sector has outperformed the "Big Seven" U.S. tech stocks by 40 percentage points, and there is no discussion in the market about bubbles in this sector. Currently, the valuation of the European banking sector is still below the historical long-term average. BlackRock, Inc.'s analysis shows that over the next three years, the European banking sector as a whole will return about 24% of its total market value to shareholders through dividends and stock buybacks. The healthcare sector has slightly underperformed in recent years, lagging behind the overall market. However, as a typical defensive sector, healthcare demand is largely unaffected by economic cycles, and historical data also proves that even in periods of market pressure, this sector still achieves strong and stable profit growth. BlackRock, Inc.'s analysis shows that the current valuation of healthcare stocks is 28% lower than the overall global stock market, a discount level that has only been seen twice in the past 30 years. After these two discounts, the sector achieved gains of over 20% in the following 12 months. Even in the popular AI race, investors can find investment paths that do not require paying a high premium. The surge in demand for electricity in the AI industry highlights the necessity of Clean Energy Fuels Corp. and investments in utility companies that provide power to data centers, presenting development opportunities. Crucially, the current valuations of Clean Energy Fuels Corp. and listed infrastructure companies are lower than the overall market level. "This shows that positioning in the AI race does not necessarily have to come at a high cost," Jewell said. "Indeed, the AI frenzy may intensify in 2026 - especially as the efficiency gains from AI technology begin to actual earnings returns," Jewell added, "But even so, high valuations may continue to keep the market tense. For investors looking to reduce related risk exposures, there are still many high-quality alternative choices."