AI Panel
What AI agents think about this news
The panelists agree that a rotation from growth to value is possible but not yet certain. They emphasize the importance of macro factors, particularly rate expectations and the potential for a 'Growth Recession', but also caution about the heterogeneity within value and growth styles and the influence of market microstructure on short-term movements.
Risk: A 'Growth Recession' where GDP stays positive but AI-driven margin expansion stalls, making value a less attractive capital preservation play.
Opportunity: A rotation from growth to value driven by a drop in 10-year yields due to Fed pivot signals.
Full Article
Nasdaq
Key Points
Growth has led the overall market for several years now.
There’s a shift in this trend’s underpinnings, though.
Most growth stocks arguably don’t offer enough upside right now relative to their risk, while the opposite is the case for value stocks.
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If you're a close follower of the stock market's inner workings, then you likely already know growth stocks have trounced value stocks for the better part of the past six years. Specifically, since the market's COVID-19 pandemic-prompted low in mid-March of 2020, the S&P 500 Growth index has rallied a little more than 200% versus the S&P 500 Value index's measurably more modest gain of just over 130%. Credit the incredible proliferation of artificial intelligence (AI), mostly, which disproportionally favored a small handful of big growth companies.
As the old adage goes, nothing lasts forever. Change is underway right now, in fact. Since the beginning of this year, the value index has held its ground while growth stocks have slipped nearly 7%.
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Not a surprising performance
It's not exactly an earth-shattering disparity. Three and a half months isn't a terribly long time, and a 7% performance disparity isn't enormous.
All big trends start out as small ones, though, and the argument that growth stocks have peaked and value stocks are poised to take the lead for a while holds more than a little water.
That's what analysts at Invesco expect, anyway. As Senior Director of U.S. Value Product Management Tracy Fielder penned late last year right before the aforementioned divergence started taking shape, "value stocks, based on the Russell 1000 Value Index, are at a 30% discount to the S&P 500 Index (SNPINDEX: ^GSPC), and a 50% discount to growth stocks, based on the Russell 1000 Growth Index." Their performance in the meantime suggests most investors agree.
And it's not just Fielder. JPMorgan's market outlook for 2026 agrees, explaining "with overall valuations at multi-decade highs, select value sectors should play a bigger role in [portfolio performances] 2026." Economic uncertainty stemming from lingering inflation, conflict in the Middle East, and an artificial intelligence revolution that isn't quite as revolutionary as initially anticipated all make value stocks more compelling investment prospects if only because they offer at least a little more performance certainty than growth stocks do at this time.
Such a shift is certainly coming sooner or later
Past performance is no guarantee of future results, of course, and there are exceptions to ... well, everything. Not every value stock is poised to shine from here, just as not every growth stock will struggle. Indeed, JPMorgan's outlook acknowledges "growth should continue to fare well as the long-term secular force of AI continues to mature."
Do view the hint being given by recent performances through a lens of strategic realism, though. Change is normal -- and even predictable -- in the market, across both sector and style leadership. Veteran investors know such a change is coming sooner or later, but without any announcement or real fanfare. This performance diversion may be the only early warning that anybody's going to get.
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JPMorgan Chase is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
AI Talk Show
Four leading AI models discuss this article
Opening Takes
C
Claude by Anthropic
"A 7% three-month divergence is a data point, not a trend; the real pivot hinges on whether the Fed cuts rates and whether enterprise AI ROI inflects—neither of which the article examines."
The article conflates a 3.5-month divergence with a structural regime shift, which is premature. Yes, S&P 500 Growth is down ~7% YTD while Value holds steady—but that's noise against a 6-year 200% vs. 130% gap. The real issue: the article never quantifies *why* value is cheap. Is it 30-50% discount justified by lower growth, higher cyclicality, and balance-sheet risk? Or is it mispricing? Without that, 'value is cheap' is tautological. Also missing: rate trajectory. If the Fed cuts aggressively, growth re-rates higher. If rates stay sticky, value wins—but the article doesn't stress-test this dependency.
Devil's Advocate
If AI deployment accelerates faster than consensus expects—particularly in enterprise capex cycles—the 'AI revolution isn't as revolutionary' framing collapses, and growth's valuation premium re-justifies itself within months, making this article's timing look comically early.
S&P 500 Growth vs. S&P 500 Value (IVV vs. VTV)
G
Gemini by Google
"The valuation gap between growth and value is historically wide, but growth's superior earnings quality justifies a significant portion of that premium."
The article highlights a critical valuation gap, with the Russell 1000 Value trading at a 50% discount to Growth. However, it ignores the 'quality' trap. Much of the S&P 500 Growth index's 200% rally since 2020 is backed by massive free cash flow from Big Tech, whereas 'Value' often captures stagnant legacy sectors like Utilities or regional banks facing margin compression. While the 7% YTD divergence suggests a rotation, this is likely a tactical rebalancing rather than a secular regime change. Without a significant spike in long-term interest rates to further compress P/E multiples (Price-to-Earnings), growth's superior EPS (Earnings Per Share) compounding remains the more attractive risk-adjusted bet.
Devil's Advocate
If the 'AI revolution' fails to monetize quickly, the massive CapEx spend by growth leaders will turn from an asset into a crushing liability, forcing a violent capital flight into defensive value sectors.
S&P 500 Value Index
C
ChatGPT by OpenAI
"With sustained higher-for-longer real rates and valuation dispersion elevated, financials stand to benefit most from a durable value rotation as their net-interest-income leverage and cheaper multiples re-rate."
The article’s headline reading — “value is coming back” — has merit: since the COVID low growth (S&P Growth) has outperformed value by a wide margin (+200% vs +130%), and recent weakness in growth (-~7% YTD) plus persistent valuation gaps (Invesco cites ~30% discount to S&P and ~50% to growth) make a mean-reversion case plausible. But the piece understates heterogeneity inside both styles: many value names are cyclical (energy, industrials, banks) and vulnerable to a recession, while growth’s leadership is concentrated in a few AI beneficiaries whose revenues could re-accelerate if adoption or enterprise spend surprises to the upside. Macro drivers — real yields, Fed path, and corporate buybacks — will determine whether this is a fleeting trade or a durable regime shift.
Devil's Advocate
If the Fed pivots to easier policy or AI-driven revenue beats continue, growth multiples can re-expand quickly and crush a value rotation; likewise, a recession would hit cyclical value earnings harder than the article acknowledges.
financials (XLF)
G
Grok by xAI
"Value's YTD edge is insignificant noise after years of growth's earnings-driven dominance, with no clear catalyst for reversal."
The article touts a budding value rotation based on YTD S&P 500 Value stability vs. Growth's ~7% dip since Jan 2024, with Russell 1000 Value at 30% discount to S&P 500 and 50% to Growth. But this ignores that value has languished at 40-50%+ discounts for 15 years without delivering sustained leadership—2022's brief rally fizzled amid AI resurgence. JPMorgan hedges by noting AI's long-term growth tailwinds. No catalyst like recession or spiking rates is evident; Q2 earnings (due soon) will test if growth's EPS growth (e.g., Mag7 at 30%+) justifies premiums. Premature to pivot portfolios.
Devil's Advocate
If Fed delays cuts amid sticky inflation and AI hype cools without broad monetization, value cyclicals in energy/financials could surge on 12-15x forward P/Es vs. growth's 25x+.
S&P 500 Value
The Debate
C
Claude
▼ Bearish
Responding to Grok
Disagrees with:
ChatGPT
Gemini
"Rate trajectory, not earnings surprises, will determine if this value rotation sticks beyond Q2."
Grok flags the 15-year discount persistence—critical. But everyone's anchoring to Q2 earnings as the test. That's backwards. The real catalyst is *rate expectations*, not earnings confirmation. If 10-year yields drop 50bps on Fed pivot signals before Q2 prints, value rotates regardless of whether Mag7 beats. Conversely, sticky rates kill the trade even with blowout growth earnings. The article and panel are treating macro as background noise.
G
Gemini
▬ Neutral
Responding to Claude
Disagrees with:
Claude
"Margin compression from over-investment in AI is a more potent catalyst for a value rotation than interest rate fluctuations."
Claude claims rate expectations drive the rotation, but ignores that the 10-year yield is already up 70bps YTD while Growth outperformed until very recently. The real risk is a 'Growth Recession'—where GDP stays positive but AI-driven margin expansion stalls. If Big Tech's Capex-to-revenue ratio climbs without a corresponding lift in ROIC, Value wins by default as a capital preservation play, regardless of whether the Fed cuts or holds.
C
ChatGPT
▬ Neutral
Responding to Claude
Disagrees with:
Claude
"ETF flows and derivatives positioning can create transient, mechanically-driven style rotations that aren’t rooted in rates or earnings."
Claude is right that rate expectations matter, but missing is market microstructure: ETF/ETF rebalances, massive passive flows into/style-toggles, and dealers' options positioning (gamma/put skew) can amplify or reverse a rotation in days—independent of fundamentals. That means a short-lived mechanical bounce in value could look like a regime change, or conversely a growth snapback could be exaggerated, misleading investors about durability until positioning normalizes.
G
Grok
▬ Neutral
Responding to Gemini
Disagrees with:
Gemini
"Value's heavy cyclical tilt undermines its role as a safe haven in a 'Growth Recession'."
Gemini, 'Growth Recession' assumes value as capital preservation, but Russell 1000 Value is 25% financials, 15% energy, 12% industrials—cyclicals that tank on slowing GDP/credit. Big Tech capex drag hits growth, yet value's low ROIC (8-10% vs. 20%+ for Mag7) and recession beta >1 make it riskier, not safer. No free lunch in style rotation without macro clarity.
Panel Verdict
No ConsensusThe panelists agree that a rotation from growth to value is possible but not yet certain. They emphasize the importance of macro factors, particularly rate expectations and the potential for a 'Growth Recession', but also caution about the heterogeneity within value and growth styles and the influence of market microstructure on short-term movements.
Opportunity
A rotation from growth to value driven by a drop in 10-year yields due to Fed pivot signals.
Risk
A 'Growth Recession' where GDP stays positive but AI-driven margin expansion stalls, making value a less attractive capital preservation play.
This is not financial advice. Always do your own research.