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1Scan for outdated or missing drivers - takes under a minute2Clear out junk files and repair common Windows errors3Fix the driver behind crashes, sound loss and screen glitchesAI-linked stocks can rise even when many other shares fall because a market index is not the same thing as the typical stock. In a capitalization-weighted index, a few very large companies can outweigh declines across numerous smaller constituents. At the same time, investors may expect AI-related firms to earn more or grow faster than companies facing weaker demand or higher costs. Neither pattern means all AI shares rise together—or that they will keep outperforming.
How an index can rise while most stocks fall
Many widely followed indexes are capitalization-weighted: companies with greater stock-market value have more influence on the index’s return. If a handful of the largest constituents gain enough, they can lift the index even while a larger number of smaller stocks decline. Index performance therefore does not tell you how broadly gains are shared.
To understand what is happening, distinguish among three questions: How did the headline index perform? How did the typical constituent perform? And how many stocks advanced versus declined? A capitalization-weighted index, an equal-weighted version, the median constituent, and a market-breadth measure answer different questions. A rising headline index alone cannot establish that most stocks rose.
The Federal Reserve Bank of San Francisco has documented a similarly concentrated pattern in AI-related investment: AI-positive investment and its contribution to aggregate investment growth were concentrated among the very largest firms (May 2026 analysis). That helps explain why a small number of AI-linked companies can have an outsized effect on a market-weighted benchmark.
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Why AI-linked companies may hold up better
Earnings and growth expectations differ
A share price reflects expectations about future results as well as earnings already reported. Investors may continue to buy a company if they expect demand for its products or services to grow, even as other businesses face slowing sales, weaker margins, or higher financing costs. In a November 2025 discussion, Federal Reserve Vice Chair Philip Jefferson described many well-known AI-linked firms as having established and growing earnings, while noting uncertainty about whether expectations and spending would be justified (Federal Reserve speech). That was a dated characterization, not a promise about those firms’ performance now.
AI spending has been a concentrated investment force
In a May 2026 analysis of public firms, the San Francisco Fed found investment growth at AI-positive companies was roughly 25 percentage points higher than at other public firms in the first three quarters of 2025. In the authors’ analysis, AI-positive firms accounted for all public-firm capital-investment growth since 2024, while other firms collectively had slightly negative growth. These findings describe the study’s sample and method; they are not a claim about every U.S. company or GDP, and they do not show that every AI project will earn an adequate return (San Francisco Fed analysis).
Federal Reserve Governor Lisa D. Cook said in a September 28, 2026 speech that “a large portion of the rise in equity prices over the past few years can be attributed to enthusiasm about AI, and that added wealth appears to be feeding through to household spending.” She also cautioned that the timing and breadth of productivity effects are uncertain (Federal Reserve speech). The point is that enthusiasm and investment can support prices and economic activity; whether they ultimately translate into durable productivity and profits remains uncertain.
Why strong AI demand does not guarantee strong returns
Good business prospects and good stock returns are not interchangeable. If investors already expect rapid growth, much of that optimism may be reflected in a share price. A company can keep growing and still disappoint investors if results fall short of expectations; a high starting valuation can also leave less room for error.
The Federal Reserve’s November 2025 Financial Stability Report said the S&P 500’s forward price-to-earnings ratio was above its historical median, while its estimated equity premium was near a 20-year low as of October 2025 (asset valuations section). These are dated valuation observations, not evidence that a downturn is imminent. They do help explain why prices may be sensitive to changed expectations or higher financing costs.
The International Monetary Fund has outlined risks including AI-related firms failing to deliver earnings sufficient to justify valuations, tighter financing conditions, and stress amplified by leverage or a pullback in investment (IMF analysis). These are possible vulnerabilities, not forecasts. AI-linked firms also differ in their earnings, valuations, spending plans, and financing exposure, so “AI stocks” should not be treated as one uniform investment.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What to check when the market appears divided
- Compare market measures: Set the capitalization-weighted index beside an equal-weighted measure and, where available, the median constituent’s return.
- Check breadth: Look at advancing versus declining shares to see whether gains are widespread or concentrated. The cited official analyses provide context, not a live breadth reading for a particular trading session.
- Look beyond the label: For an individual company, consider its current earnings, expected growth, valuation, AI-related capital spending, and exposure to financing conditions—not simply whether it is called an AI stock.
- Match the time period: Compare returns over the same dates. A single session can look different from a month or a year, and past investment or valuation figures do not describe today’s trading.
Without date-matched market returns and breadth data, it is not possible to say that AI shares advanced on a particular day while most of the market declined. The explanation is a market mechanism, not a report of a specific session: concentrated gains and differing company outlooks can produce that divergence, while future performance remains uncertain.
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