The recent correction in AI-related stocks is merely profit taking and a healthy rotation into other stocks. This means money is not leaving the stock market, but it is merely broadening out to cover more sectors. In fact, we remain in the midst of a FOMO (Fear of Missing Out) market, so the investor stampede should persist, suggests Louis Navellier, founder and chairman of Navellier & Associates.
Based on the latest quarterly back testing of our Stock Grader, the top 20% of stocks are performing the best (up from the top 10% in the previous quarterly back test at the end of February). Breadth and power also increased in the eight-factor Fundamental model to the top 65% of stocks performing the best (up from the top 30% in the previous quarterly back-test at the end of February).
(Editor's Note: Louis is speaking at the 2026 MoneyShow Masters Symposium Las Vegas, scheduled for July 19-22. Click HERE to register.)
S&P 500 Index (^SPX)
Yes, Bank of America strategist Savita Subramanian said the gap in the tech sector between the best and worst performing quintiles’ median stock is a “whopping” 120 percentage points. That was the highest gap since February 2000, the peak performance month of the Internet boom. Subramanian said this rich spread “rivals the dotcom bubble,” when the gap reached 130 points just before the market peak in March 2000.
My problem with Subramanian’s conclusion is she is ignoring the underlying fundamentals of this market versus the 2000 peak. Tech earnings were mostly negative back then, while the S&P 500 Index’s (^SPX) earnings rose 29.3% in the first quarter of 2026. Furthermore, the S&P 500’s earnings are forecasted to rise 21.5% this year.
Before closing, I’d like to say a word about the SpaceX (SPCX) IPO, which began trading on Friday and gapped up (since it was grossly over-subscribed, with $350 billion chasing $75 billion in stock offered). Even though SpaceX is off to a good start, the typical IPO stalls within a few months, as insider stock lockups expire and insider selling picks up.
But I think the Anthropic IPO will be even more successful than SpaceX, since the excitement over that company’s Claude AI promises some explosive growth. In the end, the IPO boom this year will reach an all-time record – and an IPO boom is great for investor confidence.
