Why the AI Stock Surge is Leaving Most Fund Managers Behind

2026-05-15 economy

New York, Friday, 15 May 2026.
As artificial intelligence megacaps dominate the market, just 28% of active fund managers are outperforming the S&P 500, highlighting the severe challenges facing diversified portfolios today.

The Reversal of Fortune for Stock Pickers

Early in 2026, active equity managers appeared poised for a comeback, but the landscape shifted dramatically by mid-May [1]. The proportion of mutual funds outpacing the S&P 500—which itself had risen 8.7% by early May 2026 [3]—plummeted to a mere 28% [1]. This marks a steep decline from the end of February 2026, when over 60% of stock pickers were beating the benchmark [1]. The reversal is largely attributed to capital rotating back into a highly concentrated group of artificial intelligence heavyweights, leaving diversified portfolios struggling to keep pace [1].

High-Profile Casualties in the AI Race

The struggles of once-prominent funds illustrate the severity of this narrow rally. Cathie Wood’s ARK Innovation ETF (ARKK), which historically delivered massive returns during broader tech rallies, was up a sluggish 1.7% for the year through May 12, 2026 [3]. Consequently, investors have grown impatient, withdrawing approximately $251 million from the fund on a net basis this year, a trend exacerbated by a massive $2.9 billion outflow on April 28 alone [3].

Infrastructure and the Next Wave of Growth

The artificial intelligence trade is also rapidly expanding beyond semiconductor manufacturers into the physical infrastructure required to sustain it. Vertiv Holdings, a manufacturer of power and cooling systems for AI data centers, has seen its stock price skyrocket 130% in 2026, reaching highs of $377.77 [4]. The company reported first-quarter net sales of $2.65 billion—a 30% year-over-year increase—and an adjusted free cash flow that jumped 147% to $653 million [4]. Based on the reported 30% growth, the previous year’s first-quarter net sales were approximately 2.038 billion [alert! ‘Derived calculation based on 30% growth of $2.65B current sales’].

The Changing Expectations for Active Management

The dramatic divergence in returns is fundamentally altering investor behavior and expectations. Anna Paglia of State Street Investment Management observes that modern investors no longer possess the patience to endure multi-year periods of underperformance from active strategies [6]. In an era where alternative investment choices are readily accessible at the tap of a screen, the traditional grace period granted to managers to explain lagging returns is rapidly evaporating [6].

Sources

Active management Tech megacaps