Photo Knut Hellandsvik © DNB
By Knut Hellandsvik, Head of Equities at DNB Asset Management
The first half of 2026 was shaped by geopolitical uncertainty, a sharp increase in investment in artificial intelligence and major divergences across sectors. Even so, equities once again proved to be a favourable asset class for investors. We expect that positive trend to continue through year-end, although market leadership is likely to broaden across a wider range of sectors. Alongside the previous winners in semiconductors, we see particularly attractive opportunities in software, consumer goods and healthcare, as well as in banks and financial services.
At the start of the year, the main hyperscalers were expected to increase capital spending by around 40%. After first-quarter results, that forecast was raised to 80%. This shows the pace at which data centres and related infrastructure are currently being rolled out. Semiconductor and memory-chip manufacturers are the primary beneficiaries. The Philadelphia Semiconductor Index (SOX) has risen 93% year to date. By contrast, the software sector has fallen 14%. For investors, it was therefore crucial to be positioned on the right side of this exceptionally strong trend.
However, this investment wave is now reaching far beyond the chip industry. New data centres require electricity, power transmission networks, cooling systems, cables, buildings and suitable land. Demand is therefore increasingly benefiting energy providers, infrastructure companies, construction groups and real estate firms. Smaller companies are also winning a growing share of contracts. AI investment is thus helping to broaden the market rally, and this is no longer an exclusively American phenomenon: other regions are also launching major investment programmes. In South Korea, for example, a ten-year initiative aims to develop new data centres and AI-related factories, involving Samsung and SK Hynix among others.
Yet share-price moves also show how elevated expectations have become. Samsung’s share price has risen by around 400% in one year. SanDisk has gained 780% since the start of the year alone. In such an environment, even a small disappointment can trigger a sharp market reaction. Still, the current situation cannot be compared with the 1999 tech bubble. Samsung is expected to post the world’s highest net profit in 2026 while trading at just six times earnings. By comparison, Cisco at times traded at 170 times earnings during the dot-com bubble.
After the extreme volatility seen in the first half, we expect market leadership to be more broadly distributed. Software companies look particularly attractive after their share-price declines. The sector has clearly underperformed even though artificial intelligence should also deliver significant long-term gains in productivity and efficiency. We also see opportunities in consumer goods. This has been one of the weakest sectors year to date and now offers attractive valuations. Several potential catalysts could support a recovery.
The conflict with Iran has driven up energy prices and, in turn, inflationary pressure. In the United States, gasoline prices have at times risen by as much as 50%, placing a heavy burden on American households dependent on cars. If oil prices ease again and inflation moderates, consumer purchasing power could improve.
The market is currently pricing in a 25-basis-point rate hike from the US Federal Reserve in 2026. We believe, however, there is a strong probability that such an increase will not be necessary if inflationary pressures subside. A more favourable environment, marked by lower energy prices, softer inflation and steadier interest rates, could allow consumer stocks to stage a meaningful comeback.
The political backdrop ahead of the US midterm elections could also support that shift. It is becoming increasingly important for the US government to refocus on domestic issues and address the financial constraints facing the public.
Alongside software and consumer goods, we continue to see opportunities emerging in banks and financial services. Financial stocks were already among the sectors that performed relatively well in the first half. We believe they will also receive additional support in the second half.
Healthcare is also becoming increasingly attractive. It has been one of the weakest segments of the market so far, but over recent weeks it has shown the first signs of recovery. At the same time, valuations look attractive relative to expected earnings growth. One specific catalyst is the planned coverage of certain medicines by Medicare in the United States from 1 July. Novo Nordisk and Eli Lilly could be among the beneficiaries.
In addition, healthcare could be one of the main long-term beneficiaries of artificial intelligence. Jensen Huang, CEO of Nvidia, has identified healthcare as one of the areas where AI could have a particularly significant impact in the future. The combination of low relative valuations, structural growth and new technological opportunities suggests the sector will regain a more central place in investors’ attention during the second half.
This broadening of the market is not limited to sectors. The Russell 2000, which tracks US small-cap stocks, has significantly outperformed the S&P 500 since the start of the year. We are seeing a similar trend in Europe. European equities could also benefit from investors’ growing desire to diversify their portfolios more effectively. After several years dominated by a handful of large US technology companies, capital is increasingly flowing into other regions, sectors and company sizes.
The “Magnificent Seven” have fallen by around 3% to 4% this year. One reason is that some large technology companies are scaling back share buybacks in order to invest more heavily in infrastructure and artificial intelligence. In some cases, they are even turning to additional financing through debt or equity issuance.
This development is not fundamentally negative. On the contrary, it supports broader market performance and reduces index dependence on a limited number of companies.
The rising number of large initial public offerings has also fuelled debate about a possible oversupply of new shares for the market to absorb. For now, however, the figures do not support that concern. In the United States, around 100 IPOs are expected in 2026, compared with around 250 in 2021 and nearly 400 in 1999. The estimated volume of IPOs and capital increases this year stands at about $700 billion, or nearly 1% of total US equity market capitalisation, which is in line with historical averages.
At the same time, US companies are expected to buy back more than $1,000 billion of their own shares in 2026. Overall, therefore, more capital is still being withdrawn from the market than added through new issuance. SpaceX’s IPO has also been well received so far. After a strong initial rise in the share price, we reduced our position and later bought back part of it. Even so, SpaceX remains a relatively small position in our portfolios. Much of the return potential still lies far in the future, and short-term price moves remain heavily influenced by investor sentiment as well as supply and demand.
Geopolitical tensions will continue to shape financial markets going forward. The world is gradually moving from a model of globalisation toward greater regionalisation. Governments and companies are seeking to secure supply chains for raw materials, energy and critical infrastructure. At the same time, investment in defence, technology and data centres continues to rise.
This trend is increasing capital needs and suggests that interest rates could remain structurally higher than investors have been used to over the past few decades. The roughly thirty-year period characterised by broadly falling rates and inflation appears to have given way to a new era.
For equity investors, that means a larger share of future returns will need to come from real earnings growth rather than from multiple expansion. That is exactly what we saw in the first half. Share prices were mainly supported by corporate earnings growth, while valuation multiples compressed across many parts of the market.
We therefore remain constructive for the second half. Massive investment in artificial intelligence, energy, infrastructure and regional supply chains is generating economic momentum that extends far beyond the historic winners. At the same time, wide valuation gaps between sectors and companies are creating attractive opportunities for active investors.
The key condition, however, remains companies’ ability to protect margins and deliver the expected earnings growth. Opportunities remain significant, but going forward they will be more widely distributed and will require more disciplined stock selection.
Find all our Strategic Case articles
