AI Displacement to Remain a Headwind for US Stocks
Watch on YouTube ↗  |  February 18, 2026 at 08:45 UTC  |  3:18  |  Bloomberg Markets
Speakers
Adam Vincent — Bloomberg

Summary

  • AI Displacement Fear: The market is increasingly concerned about the ROI of massive AI CapEx and the "displacement effects" on industries. This has turned US Tech/Software exposure into a liability rather than an asset in the short term.
  • The "Old Economy" Rotation: A distinct rotation is occurring away from US Tech and into European and UK indices. Europe's lack of IT exposure, previously a weakness, is now viewed as a strength due to its heavy weighting in cyclicals, commodities, and financials.
  • Dovish Pivot: Central banks (Fed, ECB, BoE) are showing a dovish inflection. The Fed expectation has shifted from 1-2 cuts to 2-3 cuts. The BoE is set for a March cut, driven by disinflation and labor market data.
Trade Ideas
Ticker Direction Speaker Thesis Time
SOFTWARE SECTOR /US EQUITIES /GROWTH TECH
SHORT Adam Vincent
Bloomberg 		Vincent notes that "Europe's previous weakness is lack of exposure to I.T. is now acting as a strength." He highlights that the FTSE 100 ("The Footsie") and European stocks are near record highs because they offer "cyclical, commodity exposure, [and] a strong financial sector." Conversely, "software stocks coming under pressure continues to be a theme" due to fears over AI displacement and CapEx efficacy. Investors are actively rotating capital. They are fleeing the uncertainty of the "AI Displacement" narrative in the US (specifically software/growth) and seeking safety in the "Old Economy" composition of European and UK indices. The lack of tech in Europe protects these indices from the current tech-centric volatility. LONG European/UK Indices (Cyclicals/Financials) and SHORT/AVOID US Software/Growth Tech to play this rotation. A sudden positive shock in AI productivity data or a reversal in US tech sentiment could unwind this rotation rapidly. —
FXB
SHORT Adam Vincent
Bloomberg 		Vincent states the Bank of England is "increasingly dovish" and the data is "set for a march cut." He believes the market may see a second cut later in 2026. He also notes "political risk" and that these factors could "keep down pressure" on the currency. Interest rate cuts generally weaken a currency by lowering the yield available to foreign investors. With the BoE moving faster/more dovishly than previously expected (validating the disinflation narrative), the Pound Sterling (GBP) faces downside pressure against peers. SHORT FXB (British Pound proxy). If inflation data surprises to the upside, the BoE may be forced to hold rates, causing a sharp rally in the Pound. —