Despite recent market volatility and sharp pullbacks in software stocks, AI euphoria is far from finished, according to Holly Newman Kroft, managing director at Neuberger Berman Private Wealth.
In an interview with CNBC, Kroft emphasized that the Magnificent Seven tech companies—Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Meta (META), Tesla (TSLA), and Nvidia (NVDA)—will continue to deliver strong earnings growth and significantly impact the S&P 500 (SP500), even as the Nasdaq (COMP:IND) faced pressure with Microsoft dropping more than 10%.
Kroft noted the contradictory market reactions following earnings releases from Meta (META) and Microsoft (MSFT), pointing out that both companies beat their earnings expectations yet saw vastly different stock performances.
“AI euphoria isn’t over. The Mag 7 is going to continue to have strong earnings growth,” she said. The managing director explained that despite the tech giants’ continued fundamental strength, investors are now approaching these companies with greater scrutiny.
The shift in investor behavior marks a departure from treating the Magnificent Seven as a unified basket. “We’re seeing… a continuation of doing a deeper dive into each of the seven companies and looking at them independently as opposed to a basket,” Kroft explained.
Investors are now paying closer attention to each company’s CapEx spending plans and evaluating whether they believe in the individual growth stories being presented.
While tech stocks faced headwinds, Kroft expressed enthusiasm for the broadening market, noting that industrials (XLI), financials (XLF), consumer staples (XLP), real estate (XLRE), and energy sectors (XLE) were posting gains even during the Nasdaq (COMP:IND) selloff.
In addition, Neuberger Berman maintains an overweight position in small caps (IWM), citing attractive valuations and a pro-business, deregulatory environment under the current administration.
“Concentrated growth in seven companies is not sustainable and too risky for investors,” Kroft said.
The firm has also shifted its international strategy, moving from a neutral position in developed markets to an overweight stance in emerging markets, particularly India and Brazil. Kroft highlighted the presence of AI-related companies in these markets that are “so undervalued compared to those in the U.S.,” with earlier tariff concerns now largely eased.
For 2026, Kroft advised investors to rebalance their portfolios for risk management and to allocate cash that has been sitting on the sidelines.
While she affirmed that U.S. large-cap equities remain the core of equity exposure, she emphasized the importance of opportunistic allocation across both small-cap and emerging market (EEM) spaces to capture potential upside.