Artificial intelligence has become the leading influence on market dynamics in 2026, overtaking traditional macroeconomic and policy factors, according to Barclays.
“AI remains front and center,” analyst Anshul Gupta wrote in a client note, adding that “NVDA earnings [are] now a bigger event than macro or policy.”
Gupta said current conditions reflect a “tech revolution, not a classic ‘speculative bubble,’” arguing that market fundamentals and volatility patterns point to enthusiasm rather than unsustainable excess.
Barclays noted that valuations show little sign of systemic overheating, emphasizing that “Big Tech valuations [are] near 10-year lows,” while Nvidia’s (NASDAQ:NVDA) price-to-earnings ratio is “near post-COVID lows.”
The bank also highlighted that U.S. equities are “lagging global peers,” a dynamic it said runs counter to the hallmarks of a market bubble.
Instead, markets appear caught between “fear vs FOMO keeps both tails in play,” a balance that is sustaining volatility as aggressive upside positioning collides with ongoing demand for hedging.
According to Barclays, the AI investment cycle is shifting risk drivers away from macro themes toward company-specific factors, resulting in “sharper differentiation, even within tech.”
Looking ahead, the bank expects volatility to remain supported by structural risks linked to AI-related leverage, geopolitical tensions and the U.S. midterm elections, 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,” Barclays wrote. “ Lower correlations favor stock picking, while narrow leadership creates a tussle between diversification and Tech earnings.”