2026 Market Outlook: AI-Driven Growth and the Rise of Non-S&P 500 Markets

This analysis is based on the Seeking Alpha 2026 market outlook [1], which presents three key claims: the U.S. avoided recession despite an inverted yield curve, AI-driven CapEx by hyperscalers spurred a parallel economic boom, and half of recent GDP growth stems from AI investment masking sectoral recessions.

U.S. economic data shows mixed but positive momentum: Q1 2025 GDP contracted by 0.6% YoY, but Q2 grew 3.8% YoY, with the Atlanta Fed estimating Q3 2025 growth at 3.5% as of December 5, 2025 [2], confirming recession avoidance. AI CapEx is a major driver, with Meta earmarking $64–72 billion in 2025 CapEx for AI infrastructure, a 128% jump from 2023 [3], and the AI data-center market projected to reach $236 billion in 2025 [3].

Market index performance over 60 days ending December 8, 2025, supports the article’s thesis: small-cap stocks (IWM: +4.87%) outperformed the S&P 500 (SPY: +3.65%), while emerging markets (EEM: +3.90%) also outpaced the S&P 500 [0]. Sectoral performance is mixed: November 2025 manufacturing flash PMI was 51.9 (expansion) [4], but the truckload freight sector remains in a three-year recession [5], and retail import volumes are expected to decline through 2026 [6]. The claim that “half of recent U.S. GDP growth stems from AI investment” could not be verified with available data, creating an information gap.

1. Dual-Track Economy
   : AI-driven CapEx by hyperscalers is generating a concentrated economic boom, potentially masking weaknesses in other sectors (transport, retail).
2. Market Leadership Shift
   : Small-cap (IWM) and emerging market (EEM) outperformance relative to the S&P 500 (SPY) indicates growing momentum outside large-cap U.S. stocks, aligning with the article’s “world outside the S&P 500” narrative.
3. Yield Curve Signal Anomaly
   : The deeply inverted yield curve—historically a recession indicator—did not precede a downturn, possibly due to the AI-driven CapEx boom’s offsetting effect.

• AI Concentration
  : The AI boom is largely driven by a small number of hyperscalers, creating systemic risk if CapEx slows or fails to deliver expected returns.
• Geopolitical Vulnerabilities
  : Tariffs and trade uncertainty could disrupt AI supply chains (e.g., semiconductor imports), impacting CapEx plans.
• Sectoral Imbalances
  : Sustained weakness in the truckload freight and retail sectors may eventually weigh on the broader economy if not addressed.

• Non-S&P 500 Markets
  : Small-cap and emerging market outperformance suggests potential growth opportunities beyond large-cap U.S. stocks.
• AI Infrastructure
  : The projected growth of the AI data-center market (to nearly $934 billion by 2030 [3]) highlights long-term investment potential in related sectors.

• U.S. economy avoided recession with Q2-Q3 2025 GDP growth following a Q1 contraction [2].
• AI CapEx is a major growth driver, with Meta leading hyperscalers in AI infrastructure investment [3].
• Small-cap (IWM) and emerging market (EEM) indices outperformed the S&P 500 (SPY) over the past 60 trading days [0].
• Sectoral performance is mixed: manufacturing in expansion, but transport (truckload) and retail import sectors showing weakness [4][5][6].
• The claim that AI investment contributes half of recent GDP growth remains unverified.
• Risks include AI investment concentration, geopolitical disruptions, and sectoral imbalances.