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Investing.com -- Artificial intelligence is now the dominant force shaping market behaviour in 2026, surpassing traditional macro and policy catalysts, according to Barclays.
“AI remains front and center,” analyst Anshul Gupta wrote in a note to clients, adding that “NVDA earnings [are] now a bigger event than macro or policy.”
Gupta argued that markets are in a “tech revolution, not a classic ‘speculative bubble,’” with fundamentals and volatility dynamics pointing to euphoria rather than excess.
According to the bank, valuations do not indicate systemic overheating, highlighting that “Big Tech valuations [are] near 10-year lows” while Nvidia’s price-to-earnings multiple is “near post-COVID lows.”
Barclays added that U.S. equities are “lagging global peers,” which it said is inconsistent with bubble conditions.
Instead, a tug of war between “fear vs FOMO keeps both tails in play,” supporting volatility as upside chasing meets persistent hedging.
The AI cycle is said to be shifting risk from macro to micro drivers, with “sharper differentiation, even within tech.”
Barclays expects volatility to stay supported due to structural risks tied to AI leverage, geopolitics and U.S. midterms, even as “rising dispersion, increased vol supply, and retail-led BTD flows may dampen index vol.”
“This creates a fat-tailed backdrop for volatility: calm stretches punctuated by sharp, short-lived dislocations,” the bank wrote. “ Lower correlations favor stock picking, while narrow leadership creates a tussle between diversification and Tech earnings.”
