By Jacob Sonenshine
This looks like the moment to scour for opportunities to buy stocks outside of the highflying data center-driven names.
Chip stocks are finally taking a dip -- a signal to look elsewhere in the market.
The VanEck Semiconductor exchange-traded fund has surged about 32% this year, while many industrial manufacturers have also soared on hardware demand from Big Tech artificial-intelligence companies that are building their data centers. The semiconductor fund did drop on Tuesday -- and far more steeply than the rest of the major indexes -- suggesting other stocks could finally play catch-up.
Consider the many stocks that haven't caught fire. The equal-weighted S&P 500, a gauge of the average stock in the index, is up about over 4% this year. As the data center-driven stocks are giving back some of their recent gains, the equal-weighted S&P 500 is barely moving because many names don't have quite as much to lose.
Many, however, do have something to gain. If the price of oil doesn't hit new highs and the Iran situation doesn't worsen much more, the market will likely assume that the economy will continue to grow. A Federal Reserve that doesn't see lasting inflation and keeps interest rates stable is another factor that can help the economy expand further. That will lift sales and earnings for many companies .
But some companies to zero in on are those using AI , not building it. They're cutting many expenses, as AI can perform more tasks, and faster. That means companies will increase their profit margins as long as sales growth stays on track. Such companies can achieve fairly high earnings growth in this environment.
Look at the S&P 500 financial sector, down almost 6% this year. Morgan Stanley strategists' data show 40% of S&P 500 financial firms have mentioned quantifiable AI-related impacts to their profits in recent earnings calls. That's the second highest out of all of the index's sectors. (Technology is the first, but remember, we're looking largely at non-tech.) Financials are using AI to their advantage: It is helping them reduce their reliance on people to value assets, and to manage borrowers' credit, create insurance pricing algorithms, and identify markets to sell services.
To find some individual stocks, we looked at 22V Research's Dennis DeBusschere's screen. It pinpoints companies that are integrating AI into their operations and that have recently ranked high on 22V's "earnings sentiment" score -- a statistical model that measures how likely each company is to beat analysts' earnings estimates. The idea is to find companies that can benefit from AI, but that don't carry major risk of seeing a nasty stock price decline after earnings.
Some financial names on the screen that report earnings Wednesday or later are T. Rowe Price Group, Broadridge Financial Solutions, insurance broker Arthur J. Gallagher, and Allstate.
Others are found in a similar framework we used. We looked for financials that have beaten earnings expectations in at least seven of the past eight quarters, according to FactSet, and that report April 30 or later. Some examples are Mastercard, insurer CNO Financial Group, asset manager Federated Hermès, and Cboe Global Markets.
Achieving investment exposure to this theme is best done through buying most or all of this basket of stocks. Each company comes with its own, business-specific risks, but their earnings in aggregate have bright futures. Give them stocks a shot.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 28, 2026 16:28 ET (20:28 GMT)
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