Tesla's stock closed last week down 2.6% to $438.07 after Q4 deliveries dropped 16% YoY to 418k, leading to an 8.5% full-year decline amid EV competition from Ford $F ( ▲ 2.45% ) and GM $GM ( ▼ 1.17% ).

However, energy storage hit a record 14.2 GWh, up 50% YoY.

This signals a shift from Tesla from EVs to AI/energy, which can be bullish long-term but volatile short-term.

Slowing sales suggest competition and saturation in the market, but energy growth offers high margins in renewables.

Autonomy (robotaxis) and robots are the key wildcards here. If scaled, they could drive massive value.

The stocks 34,000% gain post-IPO prices in absolute perfection.

Investors can be optimistic on AI/clean energy trends, but it’s important to watch Jan. 28 earnings for execution details.

Focus on milestones over deliveries with Tesla, those are where the key numbers are.

2025 was a year dominated by AI-driven growth stocks and the Magnificent 7’s outsized influence on the entire stock market.

In 2026, the stock market is poised for a potential pivot.

Growth stocks, specifically in tech and AI, have soared on hype and massive capex, but their valuations are now stretched very thin.

The Russell 1000 Growth Index trades at a P/E of ~39.6x while the Value Index’s is trading at a P/E of ~19.5x.

Wall Street strategists, namely Goldman Sachs and Morgan Stanley, are betting on a rotation toward value stocks in the coming years.

As you can see below, the flow into Value Funds in 2025 outpaced Growth, and Wall Street is predicting the same to happen in 2026.

This is due to macro tailwainds like Fed rate cuts and broadening corporate earnings.

This could make 2026 the year value finally catches up, offering a "boring but normal" market with reduced concentration risk and opportunities in overlooked sectors like financials, industrials, and cyclicals.

In fact, here are the sectors Morgan Stanley recommends based on Overweight, Equal Weight and Underweight.

Fundamentals continue to shift as the U.S. economy normalizes post-pandemic.

US potential GDP growth is forecasted by Goldman Sachs Research to average about 2.1% in 2025-2029 before accelerating in the early part of the next decade as AI boosts growth further.

The unemployment rate is forecasted to tick up to 4.5% however appears to remain resilient overall.

As of today, the chance of a recession is just 25%, down a lot since the start of the year where it peaked at 63%.

This environment suits value plays, which thrive on cyclical recovery and economic stability rather than speculative growth narratives.

The premium you can expect in growth stocks is slowly eroding as AI enthusiasm matures. That isn’t to say it won’t continue (and I sure hope it does), however the “hype” we saw in the earlier parts of 2025 are slowly fading.

Tech giants like Nvidia have consistently delivered, however their forward earnings multiple reflect almost near perfection and leave very little room for error amid potential tariff hikes and supply chain disruptions.

In contrast, value stocks are benefitting from broadening earnings.

Analysts are projecting that the bottom 493 stocks of the S&P 500 (not the Mag 7) will contribute more in 2026 than in the past 3 years combined.

This shift reduces the reliance on mega-caps, which drove the bulk of the S&P 500’s gains in 2025.

The Fed, having cut rates 3 different times throughout the year, is expected to cut rates further in 2026. How many times I’m not sure, but the plan is to get rates closer to 3% (from 3.50% - 3.75%).

Lower rates create lower borrowing costs, which can result in boosting cyclicals and industrials who are tied to infrastructure and manufacturing.

Tariffs on the other hand, favour domestic-focused value names over global tech behemoths.

You can see why I mentioned a broadening of earnings.

Financials stand out as a strong mover in 2026, with healthy net interest margins from prior rate hikes and robust loan growth due to lower rates, the sector is primed for outperformance.

Valuations in this sector are attractive, with P/E ratios below market averages and earnings poised to grow as lower rates stimulate borrowing.

Industrials and cyclicals also shine in this environment, as AI capex will eventually broaden to infrastructure (think power grids). These sectors will capture and benefit from the spillover demand.

Positioning yourself for this “boring but normal” year ahead means diversifying your portfolio away from the standard AI narrative that we’ve been so accustomed to.

With that being said, I don’t believe you should completely write them off.

In fact, our Premium Stock Picks have a good balance of AI-driven stocks. If you want access to our picks, click here.

Reduce your concentration risk by allocating funds to value ETFs like:

International value plays in emerging markets could also add expected return as the dollar softens.

Aim for a balanced portfolio:

This hedges against growth disappointments while exposing you to upside in a broadening rally.

2026's fundamentals scream value.

Economic normalization, fairer valuations, and a wider sector earnings range.

Value's comeback could reward patient investors seeking for sustainable returns.

Alex (The Dividend Dominator)
Founder and CEO of Dividend Domination Inc.
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