Thematic momentum broadens beyond AI

KEY TAKEAWAYS

• Thematic equity leadership broadened in 2026, with genomics, neuro mental health, cloud and cybersecurity gaining momentum alongside AI and semiconductors.
• Cloud and cybersecurity returned about 29% and 28% over the past three months, while semiconductors and compute infrastructure declined 18% and 9%, respectively.
• The rotation does not appear to indicate an AI slowdown as earnings remain robust: semiconductor median sales growth rose to 29.4% and compute infrastructure’s to 15.5%, even as both themes declined over the past three months.

This article includes analysis from BI strategist Jessica Lin, Thematic Strategist at Bloomberg Intelligence

AI and semiconductor stocks have dominated thematic equity performance, but market leadership has begun to extend into areas including cloud, cybersecurity, genomics and neuro mental health. The shift raises an important question for thematic investors: is leadership broadening, or is momentum simply moving away from AI? 

A thematic rotation portfolio tracked by Bloomberg Intelligence gained 27% over the past year (YTD as of Oct 16, 2026). The portfolio ranks BI themes on a blend of trailing six- and 12-month returns, equal-weights the top five and rebalances monthly. Note, the exposure of BI themes is replicated by Total Return variants of Aggregate Equal Weighted versions of Bloomberg Thematic Equity Indices in USD.

This article looks at how thematic leadership has changed in 2026, which areas are gaining momentum and what fundamentals and market breadth indicate about the rotation beyond AI.

How broadly is thematic leadership expanding? 

Considering the composition of the portfolio over the last one year, the returns did not come from a stable set of holdings. The top five themes in the portfolio have rotated repeatedly in 2026 through Sep. 2026, so the gain likely reflects a succession of leaders rather than sustained strength in any single theme. 

The composition of the portfolio illustrates that rotation. Bloomberg Transition Metals Index (BTMAET Index) had an early lead from January 2026 through March 2026, with Bloomberg Nuclear Index (BNUAET Index) and Bloomberg Space Index (BSPCAET Index) alongside it. Bloomberg Semiconductors Index (BSEAET Index) took first place in April 2026 and has held it every month since. Beneath them, the remaining four positions changed frequently since then. 

Leadership then shifted toward healthcare, with Bloomberg Genomics Index (BGEAET Index) and Bloomberg Neuro Mental Health Index (BNMAET Index) joining the top five in the second half. If we look at sub-components driving this movement, Genomics’ gains are led by therapeutics, with devices and services also contributing. Neuro mental health is led by cannabinoid and psilocybin exposure, followed by non-opioid therapeutics and neuro. 

In August 2026, Bloomberg Cybersecurity Index (BCYAET Index) joined the top five, in line with the narrative of increased focus on tighter AI safeguards taking hold, which could drive further security spending, as stronger guardrails may require additional AI and compute investment. 

Tech leadership broadens toward cloud and cyber

Within technology, leadership is shifting toward cloud (BCLAET Index) and cybersecurity (BCYAET Index) after semiconductors (BSEAET Index) and compute infrastructure (BCIAET Index) drove earlier gains. Cloud and cybersecurity have returned about 29% and 28% over the past three months, leading BI’s accelerating-tech themes, compared with declines of 18% and 9% over the corresponding period for semiconductors and compute infrastructure. The earlier AI-led gains nonetheless remain intact: semiconductors and AI are still up 63% and 41% this year, though semiconductor breadth,measured as percentage of constituents of an index above their 200-day moving averages, has narrowed sharply. 

If we analyze breadth of each tech theme, it is led mainly by recent software gains, with 84% of cybersecurity and 70% of cloud constituents above their 200-day moving averages.  

Does the software rotation signal an AI slowdown?

Fundamentals provide additional context for the rotation. Cybersecurity’s median sales growth rose to 16.6% from 14.7% three months ago as breadth of the theme jumped 32 percentage points, while cloud’s 16.1% growth was roughly steady as its breadth more than doubled. Both themes also saw P/S multiples expand, suggesting that valuations contributed to recent gains alongside fundamentals. Semiconductors nonetheless retain the strongest growth at 29.4%, up nearly 7 percentage points, despite a 17% three-month decline and P/S contraction to 5.1x from 6.3x. 

Compute infrastructure shows a similar pattern, with median sales growth rising to 15.5% from 13.1% even as the theme fell 9% and its P/S contracted. AI’s sales growth also improved, to 24.6%, as its multiple contracted. The divergence between falling prices and rising growth suggest that technology leadership has broadened without a corresponding slowdown in AI-related fundamentals. 

Longer-term returns came without materially deeper drawdowns 

The pattern is not confined to 2026. Since 2019, the top five momentum theme portfolio has gained more than 625% cumulatively, equivalent to a 29% annualized return, compared against 18% for the Bloomberg 500 Index, 14% for the Bloomberg World Index and 18% for an equal-weight portfolio of all BI thematic indices. 

That return advantage also came without materially deeper drawdowns. The portfolio’s maximum drawdown was 32%, roughly in line with the Bloomberg 500 Index and the Bloomberg World Index, and slightly below the 33% recorded across all themes. The portfolio had a Sharpe ratio of 1.2, indicating stronger historical risk-adjusted performance over the period. 

What does broader thematic leadership indicate? 

Thematic leadership turned over almost completely in 2026, with only semiconductors and AI carried through from the midyear composition into August. However, turnover has not come at AI’s expense. Semiconductor and compute-infrastructure sales growth both improved even as the performance of the two themes fell over three months and their multiples contracted. Cloud and cybersecurity, meanwhile, led on both returns and breadth. 

The broader implication is that thematic leadership is becoming more dynamic, with the portfolio rotating repeatedly through 2026. Breadth and sales-growth data suggest that fundamentals have accompanied the recent rotation, even as valuation expansion contributed to gains in cloud and cybersecurity. 

To learn more about Bloomberg Thematic Indices Methodology click here. Bloomberg Terminal subscribers can access this analysis along with associated data via BI <GO>.