The historic small-cap stock surge is entering a tougher phase as Goldman Sachs Asset Management warns that the period of effortless market gains has officially concluded.
Following the Russell 2000's best first-half start since 1991, experts signal a stark cooling-off period ahead for smaller equities, forcing investors to reset expectations for the back half of the year.
The AI Tailwind Evaporates While small caps recently posted stellar outperformance against their large-cap counterparts, Tim Urbanowicz, Head of Research at Innovator from Goldman Sachs Asset Management, cautioned that this rapid upward trajectory cannot be sustained.
A massive catalyst behind the recent boom was the artificial intelligence sector, with 40% of year-to-date gains driven entirely by AI infrastructure stocks capitalizing on rolling downstream money from massive hyperscaler spending.
However, a recent rebalance of the Russell 2000 index structurally altered this momentum, slashing the index's critical AI infrastructure exposure cleanly in half—moving from 15% down to just 7%.
