1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 31
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
Overall technology spending is rising, much like it did during the dotcom era
250
200
150
Investment in information processing equipment and software
(indexed to 100 for each time period)
100
50
1
4
7
10
13
16
19
22
25
28
31
34
37
40
Quarters
Dotcom era (1Q90-4Q99)
AI boom (1Q23-3Q25)
Source: Bureau of Economic Analysis, Bloomberg Finance LP, Scotia Wealth Management
In this phase, profits tend to concentrate among early infrastructure owners. Market leadership
becomes powerful but narrow, as returns accrue to a relatively small subset of firms positioned
at the core of the AI supply chain. This dynamic is already evident. Since the launch of Large
Language Models like ChatGPT, revenues within the S&P 500 semiconductor industry have
surged relative to the broader index, accompanied by significantly stronger margin expansion.
Early AI beneficiaries are experiencing faster revenue growth than the rest of the index
600
ChatGPT launch
500
400
300
200
100
0
2010
2013
2016
S&P 500 semis industry
2019
2022
2025
Rest of index
Source: Bloomberg Finance LP, Scotia Wealth Management
Market concentration has increased as well, with the top ten S&P 500 stocks now accounting for
roughly 40% of the index’s market capitalization, well above the historical median of around 20%.
This has translated into narrow index leadership. In 2023 and 2024, the top ten stocks accounted
for roughly 60 percent of total index returns, and while that share has declined to the mid-50s in
2025, it continues to highlight the top-heavy nature of the index.
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