Where investors won and lost in the first half of 2026

Companies on the receiving end of the AI spending boom were the winning investments in the first half of 2026. Meanwhile Bitcoin was a shocker, gold lost its shine, and IT services and consulting shares were among the names eaten alive by AI displacement fears.

There was an IPO boom in the US, with a drone software company proving to be a significantly more fruitful investment than loading up on space rockets.

The UK takeover machine kept whirring as six FTSE 100 companies were subject to bid interest, suggesting there is still value on the UK stock market despite the blue-chip index re-rating over the past three years.

Against a backdrop of war in the Middle East, stock markets in certain parts of the world continued to hit new record highs. One person even became the first ever trillionaire. That is a whirlwind of significant events and we’re only halfway through the year.

Overall, it has been a solid six months for investors, with decent returns in a lot of areas. A continuation of this trend in the second half of the year would be idyllic and reinforce the message that investing can be a fantastic way to build wealth.

The big AI rotation

Anyone who thought euphoria around AI had peaked in 2025 may be reassessing their judgement, as the stock market performance of multiple names in the first half of 2026 would suggest otherwise.

Memory chip suppliers were among the winning trades between January and June as we saw a massive rotation in the AI space. Out went software providers and in went hardware and infrastructure names as places to line investors’ pockets.

SanDisk, Western Digital, Micron and Seagate all delivered the kind of gains in six months you might normally expect over decades with investing. Demand exceeding constrained supply led to a surge in memory chip prices and took suppliers’ shares on a spectacular ride upwards. Higher selling prices and greater demand is a powerful cocktail for explosive earnings growth.

AI usage is driving demand for both high-speed memory such as DRAM and HBM and large-scale storage like SSD and HDD as hyperscalers build out infrastructure. Fast solid state memory chips help to feed data to processors that train and run large AI systems. Interestingly, the memory chip rally on the stock market now looks to be unwinding with the likes of SanDisk and Micron among the names caught up in a tech sell-off in recent days.

Triple-digit share price returns in a short space of time naturally spurred investors to look for additional ways to play the AI craze during the first half of the year. It’s one reason why emerging markets have performed well year-to-date, driven by big chip makers such as TSMC and SK Hynix. Another reason is global investors looking to diversify beyond the US.

Opportunities emerged among select US-listed power and electricity infrastructure providers amid big money going into data centre construction, although shares in this space delivered nowhere near the gains of the memory chip players.

On the flipside, previous AI winners including Meta and Microsoft have been left for dust this year. On a total return basis to 23 June 2026, Meta was down 14% and Microsoft down 24%. Once monster cash machines, big spending on AI has made the giants of technology more capital-intensive businesses and investors are no longer prepared to pay a premium for certain shares.

Bargains and IPOs

Microsoft’s shares now trade at their cheapest level in 10 years on 19.3-times forward earnings. It has regularly traded above 30-times over the past decade, illustrating how the current rating is radically different to what many investors have come to expect. Meta has de-rated to 16.6-times versus 27-times back in February 2025.

You can now buy both the software behemoth and the social media giant for less than McDonald’s, which trades on 20 times earnings. Anyone predicting that outcome at the peak of the Magnificent Seven boom would have been laughed at.

Compared to SpaceX’s sky-high valuation, Microsoft and Meta are in bargain basement territory. Paying excessively for hope rather than reality didn’t stop investors piling into SpaceX’s IPO, but it isn’t the top performing stock market flotation year-to-date. That accolade belongs to Swarmer, a drone software company which has returned 729% on its $5 IPO price.

FTSE 100 takeover frenzy

Takeovers ruled the roost on the UK stock market as the FTSE 100 was ablaze with bid action.

Beazley, DCC, Glencore, Schroders, Segro and Intertek were all on the receiving end of bid interest in the first half, helping to prop up the FTSE 100 in an otherwise calmer time for the UK market compared to last year’s spectacular showing.

Certain people might be surprised to see takeover offers coming thick and fast given that the UK market in February traded at a five-year high valuation. The 12-month price to earnings ratio went from just under 10 times earnings in 2023 to just above 14-times earlier this year. That’s a major re-rating in the market, albeit it has since pulled back to around 12-times.

A key reason for the plethora of bids in recent years was the UK market effectively being on sale. That valuation anomaly is now less prominent, but there continue to be gems seized upon by buyers taking a longer-term view.

UK market losers

Among the UK stock market’s first-half losers were housebuilders and companies perceived to be at risk of disruption from AI.

Barratt Redrow and Persimmon have suffered from a sluggish housing market and a big shift in interest rate expectations caused by oil prices soaring on the back of the Middle East conflict. The industry has faced renewed cost pressures which have seen investor fears over dividend sustainability start to creep in.

The UK stock market doesn’t have much pureplay tech, but it has plenty of tech-adjacent names that have been caught up in a fierce sell-off linked to AI. Experian, Sage and RELX have all suffered significant share price weakness year-to-date as investors wonder if their products and services might be less relevant in an AI-dominant world.

Company bosses on both sides of the Atlantic have been quick to talk down such fears, but plenty of investors aren’t listening. In the US, IT services and consulting firms including EPAM, Accenture, Gartner and Cognizant have seen their shares sold off on fears that AI tools can automate areas such as coding, testing and workflows, and that clients are cutting back on spending or delaying projects while they prioritise AI investments.

Gold and bitcoin disappoint

Elsewhere, gold hasn’t lived up to its reputation of holding or growing its value during uncertain times. Despite a war in Iran, a spike in oil prices, and political upheaval in the UK and other parts of the world, gold has been in a general downward trend this year. It has found new competition from higher bond yields and cash interest rates going up, whereas gold offers no income at all.

Bitcoin has fallen by 28% since the start of the year, with excitement around crypto turning to dust. Bitcoin is a speculative investment, and market sentiment influences its price. Large bitcoin investment vehicle Strategy recently made a rare sale of bitcoin holdings, sending a negative signal to the market. Ongoing excitement around tech stocks has also diverted investors’ interest away from crypto and more towards stocks and shares.

Defence stocks no longer a winning trade

Defence stocks have failed to sustain last year’s momentum. BAE Systems has only tracked the FTSE 100 with a 7% year-to-date return, while Babcock is down 21%. The issue isn’t limited to UK stocks as Germany’s Rheinmetall has lost more than a fifth of its value this year, and in the US, Palantir is down by a third.

The performance is down to a mix of reasons including profit taking and all the good news about a stronger earnings pipeline from greater government spending now fully priced in. Project delays and cancellations are returning to haunt the defence sector, and certain investors might simply be focusing elsewhere as the ‘buy defence’ trade is old news.