Concentration makes way for dispersion
June 2026, On the Horizon
For much of the past decade, outperforming often meant owning more of the benchmark’s largest companies. A small group of mega‑cap, asset‑light platforms dominated equity returns, making active investors compete against a concentrated index. That dynamic is shifting as AI changes the economics of the market’s largest companies and broadens the opportunity set beyond the winners of the last cycle.
The post‑global financial crisis era rewarded duration, scale, and asset‑light models. Capital flowed to companies capable of delivering durable earnings growth with limited capital intensity. The post‑COVID world is different. Higher nominal growth, stickier inflation, higher rates, and the build‑out of AI infrastructure are rewarding businesses tied to infrastructure, industry, and capital investment.
The economics of the prior leaders are changing, too. Hyperscalers collectively are being pulled from asset‑light compounding into a capital‑intensive investment race. They may have little choice but to spend aggressively to defend their positions, but that spending can pressure free cash flow and alter return profiles.
The great rotation
(Fig. 1) Returns may shift toward infrastructure providers
As of May 31, 2026.
Analysis by T. Rowe Price. For illustrative purposes only. Actual outcomes may differ materially.
For investors, the implications are significant. Index exposure remains highly concentrated even as the economics of the largest benchmark constituents become more complex. At the same time, leadership is broadening across sectors and geographies, widening the gap between companies that can turn higher investment into stronger returns on capital and those that cannot. Many beneficiaries of this cycle are also seeing improving relative growth, contributing to shifts in valuations and helping explain the recent underperformance of traditional quality and durable growth.
This creates a more challenging benchmark environment, but also a richer opportunity set for active investors who can distinguish between capex that could enhance returns and spending that dilutes them. It is more than a market rotation—it is a shift from concentration to dispersion. In the next phase, returns are likely to depend less on index exposure and more on identifying where capital intensity is creating better economics—not eroding them.
Investment implications
- Market leadership is broadening beyond a narrow group of mega‑cap technology companies, creating a more attractive environment for active security selection.
- As AI investment is likely to change corporate return profiles, companies converting capital spending into durable earnings growth may be better positioned than those facing weaker free cash flow.
David J. Eiswert, CFA
Portfolio Manager
Jun 2026
On the Horizon
Article
Geopolitical fragmentation raises risk premium
Appendix
Financial terms: Investors in the U.S. and Canada, for a glossary of financial terms, please go to troweprice.com/glossary.
Investment Risks:
Active investing may have higher costs than passive investing and may underperform the broad market or passive peers with similar objectives. Each person’s investing situation and circumstances differ. Investors should take all considerations into account before investing.
Investing in technology stocks entails specific risks, including the potential for wide variations in performance and unusually wide price swings, both up and down. Technology companies can be affected by, among other things, intense competition, government regulation, earnings disappointments, dependency on patent protection, and rapid obsolescence of products and services due to technological innovations or changing consumer preferences.
The value approach to investing carries the risk that the market will not recognize a security’s intrinsic value for a long time or that a stock judged to be undervalued may actually be appropriately priced. Growth stocks are subject to the volatility inherent in common stock investing, and their share price may fluctuate more than that of income‑oriented stocks.
All investments involve risk, including possible loss of principal. Diversification cannot assure a profit or protect against loss in a declining market.
T. Rowe Price cautions that economic estimates and forward‑looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual outcomes could differ materially from those anticipated in estimates and forward‑looking statements, and future results could differ materially from any historical performance. The information presented herein is shown for illustrative, informational purposes only. Any historical data used as a basis for this analysis are based on information gathered by T. Rowe Price and from third‑party sources and have not been independently verified. Forward‑looking statements speak only as of the date they are made, and T. Rowe Price assumes no duty to and does not undertake to update forward‑looking statements.
Important Information
Outside of the United States, this is intended for investment professional use only. Not for further distribution.
This material is being furnished for informational and/or marketing purposes only and does not constitute an offer, recommendation, advice, or solicitation to sell or buy any security.
Prospective investors should seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services.
Past performance is not a guarantee or a reliable indicator of future results. All investments involve risk, including possible loss of principal.
Information presented has been obtained from sources believed to be reliable, however, we cannot guarantee the accuracy or completeness. The views contained herein are those of the author(s), are as of June 2026, are subject to change, and may differ from the views of other T. Rowe Price Group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.
All charts and tables are shown for illustrative purposes only. Actual future outcomes may differ materially from any estimates or forward‑looking statements provided.
The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.
Australia—Issued by T. Rowe Price Australia Limited (ABN: 13 620 668 895 and AFSL: 503741), Level 28, Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000, Australia. For Wholesale Clients only.
Canada—Issued in Canada by T. Rowe Price (Canada), Inc. T. Rowe Price (Canada), Inc.’s investment management services are only available to non‑individual Accredited Investors and non‑individual Permitted Clients as defined under National Instrument 45‑106 and National Instrument 31‑103, respectively. T. Rowe Price (Canada), Inc. enters into written delegation agreements with affiliates to provide investment management services.
EEA—This material is issued and approved by T. Rowe Price (Luxembourg) Management S.à r.l. 35 Boulevard du Prince Henri L‑1724 Luxembourg which is authorised and regulated by the Luxembourg Commission de Surveillance du Secteur Financier. For Professional Clients only.
New Zealand—Issued by T. Rowe Price Australia Limited (ABN: 13 620 668 895 and AFSL: 503741), Level 28, Governor Phillip Tower, 1 Farrer Place, Sydney NSW 2000, Australia. No Interests are offered to the public. Accordingly, the Interests may not, directly or indirectly, be offered, sold or delivered in New Zealand, nor may any offering document or advertisement in relation to any offer of the Interests be distributed in New Zealand, other than in circumstances where there is no contravention of the Financial Markets Conduct Act 2013.
Switzerland—Issued in Switzerland by T. Rowe Price (Switzerland) GmbH, Talstrasse 65, 6th Floor, 8001 Zurich, Switzerland. For Qualified Investors only.
UK—This material is issued and approved by T. Rowe Price International Ltd, Warwick Court, 5 Paternoster Square, London EC4M 7DX which is authorised and regulated by the UK Financial Conduct Authority. For Professional Clients only.
USA—Issued in the USA by T. Rowe Price Investment Services, Inc., distributor and T. Rowe Price Associates, Inc., investment adviser, 1307 Point Street, Baltimore, MD 21231, which are regulated by the Financial Industry Regulatory Authority and the U.S. Securities and Exchange Commission, respectively.
Unless otherwise indicated, this material is issued and approved by T. Rowe Price International Ltd, Warwick Court, 5 Paternoster Square, London EC4M 7DX which is authorised and regulated by the UK Financial Conduct Authority. For Professional Clients only.
© 2026 T. Rowe Price. All Rights Reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, the Bighorn Sheep design and related indicators (see troweprice.com/ip) are trademarks of T. Rowe Price Group, Inc. All other trademarks shown are the property of their respective owners. Use does not imply endorsement, sponsorship, or affiliation of T. Rowe Price with any of the trademark owners.
- 202606-5512997