BlackRock came into 2026 with a clear investment plan built around three pillars: artificial intelligence, income, and diversification.

Jay Jacobs, BlackRock’s head of equity exchange-traded funds, laid out ways in which ETFs fit into the shifting market bets from the world’s largest asset manager, which oversees more than $13 trillion from investors. Investors should remain focused on growth, he says, but precision will matter more than broad exposure.

“The first is really what are the biggest growth opportunities in the market today,” Jacobs said on CNBC’s “ETF Edge” on Monday. “Where you have to get laser focused to try and find some of these targeted exposures, like artificial intelligence, that could do very well in this environment.”

That and the other investing themes Jacobs shared on “ETF Edge” are consistent with BlackRock’s 2026 annual outlook, “AI, income & diversifiers,” which was released earlier this week.

BlackRock continues to view AI as a long-term, capital intensive investment cycle. Infrastructure spending remains elevated, while productivity gains and earnings growth are backed by AI-related investments. The firm does not see the theme as nearing exhaustion.

BlackRock is among the ETF companies offering AI-focused funds, such as its iShares A.I. Innovation and Tech Active ETF (BAI), which has amassed over $8 billion in assets.

There are many other AI ETF options that have grown to over $1 billion in assets in recent years:

• Roundhill Generative AI & Technology ETF (CHAT)
• Ark Autonomous Technology and Robotics ETF (ARKQ)
• Global X Robotics and Artificial Intelligence ETF (BOTZ)
• Global X Artificial Intelligence and Technology ETF (AIQ)
• iShares Future AI & Tech ETF (ARTY)
• Dan Ives Wedbush AI Revolution ETF (IVES)

Jacobs cited the U.S. equity market’s high level of concentration, with a handful of mega-cap tech stocks now accounting for an outsized share of returns, as among the reasons to fine-tune equities exposure. The “Magnificent Seven” stocks make up over 40% of the S&P 500 Index.

“[That concentration] is either a feature or a bug,” Jacobs said. “It’s reaching historical levels.”

Jacobs said investors are responding by becoming more deliberate about how much concentration they want. Some are choosing to broaden their exposure by equal-weighting the U.S. stock market as a way to manage the risk.

Jacobs cited the interest-rate environment, and expectations the Federal Reserve will lower rates again, as a reason to make income a major focus this year as the declining rates pressure yields on cash investments. Investors who relied on money markets for income may need to reposition. “We are in a falling interest rate environment. We expect some cuts this year. We need to find new sources of income to diversify your portfolio and generate income from it,” Jacobs said.

Diversification is the third pillar of BlackRock’s 2026 approach to the market. Bouts of volatility are becoming more frequent while market leadership is narrow, and traditional portfolio design that rely on bonds to smooth out the risks from stocks — typically the so-called 60-40 portfolio — are proving less reliable during periods of stress. As a result, Jacobs said investors are looking for assets that behave differently. “Where can you really get diversification for your portfolio?” he said. “Something that’s going to behave differently from stocks and bonds.”

The underlying message from Jacobs was that investors have been very fortunate over the past decade with a U.S. stock market that has produced significant returns, but it would be risky to expect that run to continue at a similar pace. “The last 10 years, the S&P 500 has an annualized return of 13.5%, and many expect it to be lower,” he said.

Investors are facing a period of historically high concentration in the S&P 500 Index headed into 2026, with a small number of mega-cap technology and AI-related companies dominating the index’s performance and risk.

That’s leading more investment managers to advise clients as part of an annual portfolio review process to pay extra attention to opportunities to broaden holdings within the U.S. market, and across both value and overseas stocks.

“The big theme for us is making sure we have resiliency built into the portfolio and the way we are going about that is diversification,” Kathmere Capital Management chief investment officer Nick Ryder said on CNBC’s “ETF Edge” on Monday.

He expressed concern that investors remain too concentrated in the “Magnificent 7” stocks, which currently make up about 35% of the U.S. large-cap stock market index.

“It has been an awesome run for these companies, but let’s just make sure the portfolios are sufficiently diversified outside the mega-cap growth segment, also outside of U.S. equity companies,” Ryder said.

He’s not alone in advising investors to diversify away from the Mag 7.

Ed Yardeni, Yardeni Research president, said investors should be underweight the Mag 7, but overweight the “Impressive 493” during a “Squawk Box” interview earlier this week.

He was referring to the remaining 493 S&P 500 stocks.

During the “ETF Edge” podcast portion of Monday’s show, Ryder pointed to the many equal-weight S&P 500 ETFs as a good way to stay invested in the U.S. market but reduce the top holdings’ concentration risk.

The Goldman Sachs Equal Weight U.S. Large Cap Equity ETF (GSEW) is one example. The fund has attracted $397 million in flows since the beginning of the year, according to ETF.com. Though to put that into perspective, the market-weighted Vanguard S&P 500 ETF (VOO) has taken in an estimated $120 billion this year from investors.

Ryder said 2025 has been the rare year when both momentum stocks and value stocks have done very well, but he believes that over the longer-term, owning value stocks is the more important factor as stock prices experience reversion to the mean, and there is still considerable room for value stocks to appreciate, he said.

Within the U.S. large-cap space, another option to consider for diversification is a value fund, Ryder said, such as the Vanguard Value ETF (VTV).

“I don’t want to take a sector bet, but I just want to own the cheaper stocks within each sector,” he said.

But Ryder stressed that investors with a domestic bias should also be aware they have missed out on huge gains from value stocks overseas this year.

“Non-U.S. value is up [around] 40% this year,” he said.

The iShares MSCI Intl Value Factor ETF (IVLU) was up close to 44% year-to-date, through Thursday.

Ryder believes even with those gains, many value stocks remain underpriced. “The discounts on value stocks are pretty significant relative to history,” he said. “It’s axiomatic value is cheaper than the market, but sometimes it’s even more than normal, and we are at one of those times,” he added.

Correction: Nick Ryder is chief investment officer at Kathmere Capital Management. An earlier version of this article included a misspelling of his name.

A key rotation away from artificial intelligence stocks may be underway in the market.

According to Astoria Portfolio Advisors’ John Davi, a broader range of stocks are getting a “green light” because liquidity is returning to the system.

“The Fed cut rates four times last year. They cut rates twice already. They’re going to go again whether its December [or] January,” the firm’s CEO and chief investment officer told CNBC’s “ETF Edge” this week. “Historically whenever the Fed cuts interest rates, usually that’s a turn of a new cycle. Market leadership does tend to change quietly.”

He lists the latest performance in areas ranging from emerging markets to industrials. The iShares MSCI Emerging Markets ETF, which tracks the group, is up 17% over the past six months as of Wednesday’s close. The Industrial Select Sector SPDR Fund is up 9% over the same period.

“I think they can be a good offset to what’s an expensive large cap tech position, which dominates most portfolios,” he added. “We’re living in a structurally higher inflation world. The Fed is cutting rates like, why do you want to take so much risk in just seven stocks?” and

Davi prefers a global balanced approach to investing versus an overweight position in the Magnificent 7 — which is comprised of Apple, Amazon, Meta Platforms, Nvidia, Microsoft, Tesla and Alphabet, which has been trading around all-time highs. The Mag 7 makes up about a third of the S&P 500.

Sophia Massie, CEO of ETF-issuer LionShares, is also wary of going all-in on the AI trade.

“I think analysts have an idea of how much value AI will add to our economy. I don’t think we really understand how that’s going to play out between different companies yet,” Massie said in the same interview. “So, I have this sense that right now, we’re pricing in this probability that… one company may be the one that dominates, dominates AI and ends up being a big player in the future.”

Passive investing through exchange-traded funds may be losing its appeal.

Tidal Financial Group Chief Revenue Officer Gavin Filmore finds many of his clients are no longer satisfied with buying popular ETFs tied to market indexes.

 “I think investors are looking beyond just the let’s call it the ‘VOO and chill approach’ where you just buy the index in an ETF, which is a great approach but they’re looking for diversification,” Filmore told CNBC’s “ETF Edge” this week.” “And they’re not finding it within the product or within the index, so they have to look beyond that.” 

Filmore refers to the Vanguard S&P 500 ETF (VOO), which tracks the S&P 500‘s performance. Both are up almost 16% so far this year.

Morgan Stanley’s Mike Wilson sees a meaningful rotation back into U.S. stocks, and he sees one beaten-up group as a winner.

“It started out with a low-quality rally, which is what we expect – meaning a short squeeze,” the firm’s chief investment officer told CNBC’s “Fast Money” on Monday. “Then, what we noticed is the revision factors on the Mag Seven are actually starting to stabilize a bit. So, the last couple of days though stocks have acted better, and that can take the index higher. How high? 5,900. So, we’re almost there.”

The major indexes had a notable start to the week. The S&P 500 gained roughly 1.8% and closed at 5,767.57 — about 6% below its all-time high. Meanwhile, the Dow jumped almost 600 points while the Nasdaq Composite surged more than 2%.

The “Magnificent Seven” had a big role in Monday’s rally. Its members include Apple, Nvidia, Meta Platforms, Amazon, Alphabet, Microsoft and Tesla. The electric vehicle maker registered its best daily performance since November.

But Wilson, who’s also the firm’s chief U.S. equity strategist, suggests a narrow window for gains. He focused his Monday research note on the idea.

“Stronger seasonals, lower rates and oversold momentum indicators support our call for a tradeable rally from ~5500,” he wrote. “A weaker dollar and stabilizing Mag 7 EPS [earnings per share] revisions can drive capital back to the US. Beyond the tactical rally, volatility will likely persist this year.”

And, he won’t rule out new lows for the year.

“Whatever rally we’re getting now, we think probably end up fading into earnings, into May and June,” he added. “Then, we’ll probably make a more durable low later in the year.”

According to Wilson, the market weakness is mostly tied to fundamentals and technicals.

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