Investors wrestling with elevated valuations and heavy AI spending in mega-cap technology stocks could see leadership broaden in 2026 as profit growth strengthens and other sectors step up.
BNN Bloomberg spoke with Brian Vendig, chief investment officer at MJP Wealth Advisors, who said he expects earnings growth to expand beyond technology into value-oriented large caps, mid-cap and small-cap stocks, as well as financials, healthcare, utilities and select industrial names.
Key Takeaways
- Corporate profits are expected to rise about 15 per cent year over year in 2026, helping support elevated valuations and extend the bull market.
- Earnings growth is projected to broaden beyond technology, with mid-cap and small-cap stocks, along with financials, healthcare and utilities, contributing more meaningfully.
- A rotation out of mega-cap tech could unfold gradually as investors seek clearer evidence that AI spending will translate into durable returns.
- Financials, including regional banks, may benefit from a steepening yield curve and stronger loan growth, while deregulation could unlock additional capital.
- Consumer staples appear relatively expensive and household spending is slowing sequentially, prompting a tilt toward value sectors over consumer discretionary names.
Read the full transcript below:
ANDREW: Investors are grappling with what comes next for mega-cap tech amid concerns about heavy AI spending. Our guest says a rotation out of those big tech names could unfold throughout the year. We’re joined now by Brian Vendig, chief investment officer at MJP Wealth Advisors. Thanks very much indeed for joining us.
Yesterday, the Financial Times ran a story that a price war may be emerging in AI. Chinese engines have slashed prices. Now, of course, they may not be allowed into the West, but it’s interesting. How much money will people pay for AI, I guess, is the question?
BRIAN: Yeah, Andrew, I think that’s been the story that we’ve seen since the end of October, where investors are looking at those valuations and trying to say, how much do we want to pay up for growth? And we’ve seen, obviously, over the last several weeks here in 2026, software companies disproportionately punished, and then that rotating last week into some other sectors of the economy where AI disruption and concerns started to play out.
I think the bottom line, you know, where we are right now is, I think investors are in a show-me position, where they’re looking for more clarity from some of the bigger names like Nvidia, who has earnings next week. Obviously curious to see how this round of cap raising and funding goes for OpenAI, and what valuation is going to be placed on that big name in the space.
But I think, bigger picture, moving forward, is that there’s been a real focus on cyclical growth in the U.S. and policy support that has moved investors to look at valuations, look at earnings outlooks, which is why value is trading a little bit better now than growth. But I think over the balance of the year, if outlooks for growth still hold for some of these major AI names, I don’t think technology is technically in the penalty box longer term, but I think we need to be a little bit more cautious and a little bit more focused on allocations over the course of this year.
ANDREW: And broadly speaking, though, U.S. corporate profitability is still growing. I know a lot of that has been, and is, the big tech companies.
BRIAN: Yes, and so I think that’s a fair point, but I think it’s also the distribution of growth. So when we look at earnings outlooks for the balance of the year, you know, we’re expecting 2026 with publicly traded companies growing about 15 per cent year over year in profit growth, but bigger contributions coming from areas outside of tech due to the impacts of fiscal reform through the tax bill, spending in capex, and a steepening yield curve that should help financials.
Health care always seems to perform a little bit better in a midterm election year domestically here, so you have a little bit more of a balanced view on earnings growth, and I think the market is sniffing that out right now.
I think once we get past this, the second half of the year, and you look at 2027, we see more of a fiscal drag happening within the economy. And I think over the second half of the year, we’re going to get a little bit more clarity on the AI innovation investment thesis and that next wave of where AI innovation could play out.
So I think in the interim, you know, staying broadly diversified across both large, medium and small, growth and value makes sense until we get a little bit more information. And at the same point in time, I think tech is still a big contributor to earnings, like you said, Andrew, and something that investors should still hold in their portfolios accordingly.
ANDREW: Would you be inclined to pile into big banks — not necessarily talking about these stocks — but the likes of JP Morgan and Citigroup?
BRIAN: I think financials right now are quite interesting. The big banks have had a pullback recently, so there is some value there, for sure. And also I think it’s worth looking at some of the regional banks as well, because they’ll have more of a contribution to profits as loan growth potentially accelerates with economic activity over the course of the year.
And also, with a steepening yield curve, they get more of a bottom-line contribution based on net profits from loans. So I think big banks, with a recent pullback, look attractive, but I think also looking at some regionals makes sense.
ANDREW: And what about the consumer stocks? Obviously General Mills, a classic defensive consumer name, reporting pressure on consumers — that happened a few days ago — and that put pressure on other packaged goods companies. Are you seeing value there?
BRIAN: Yeah, so the consumer staples and some of those consumer names right now are trading at forward PEs actually very similar to their peers in the tech space, so I kind of see the consumer staple names actually as quite expensive.
And also, with the recent data that we just got on GDP numbers and PCE numbers as another key inflation gauge for the Fed, we’re seeing that quarter over quarter, yes, consumer spending is holding tight, but it’s actually in a decline on a sequential quarter-over-quarter perspective.
So when the froth kind of wears off on these tax refunds that are coming through over the next couple of months, and higher income earners spending a little bit more in tax due to increasing obligations to long-term capital gains, I think in the second half of the year, consumers are going to continue to be very sensitive to price.
Which is why we’re not necessarily looking at following through on this consumer discretionary trend in the short term, and actually looking for areas of value outside of the consumer discretionary and staples areas, such as financials, health care, industrials and some aspects of utilities that are kind of playing into the capex spending cycle, and also just the changes in the potential yield curve, with profits still being durable for companies, as mentioned before.
ANDREW: Brian, thank you very much indeed.
BRIAN: Thank you.
ANDREW: Brian Vendig, chief investment officer at MJP Wealth Advisors.
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This BNN Bloomberg summary and transcript of the Feb. 20, 2026 interview with Brian Vendig are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
