From AI infrastructure to biotech and defense, here’s where investors are placing their bets this year.
00:00 Introduction
00:17 Follow the Money: 2026 Outlook
00:46 Where Capital Is Being Spent
01:09 AI Infrastructure, Power & Defense
02:04 Best Ways to Get Exposure
02:15 AI, Utilities & Defense Picks
03:23 Growth Beyond the Mag Seven
04:30 Stocks to Question or Avoid
05:03 Is the Bull Market Still Alive?
06:01 Preparing for Market Volatility
07:00 Fixed Income Opportunities
07:48 Venezuela, Oil & Market Resilience
08:59 Is the Market Overpriced?
09:45 Expensive Stocks to Avoid
10:03 Expensive Now, Bargain Later
Transcript:
Caroline Woods:
Joining me now, Kevin Mahn, President and Chief Investment Officer at Hennion and Walsh Asset Management. Kevin, always good to have you. Thanks for being back at the desk.
Kevin Mahn:
Great to be back. Happy New Year.
Caroline Woods:
All right. So I was taking a look at your 2026 outlook, and you say that your theme for the new year is “follow the money.” Tell us—what does that mean? Where is the money going?
Kevin Mahn:
Exactly. So when I say follow the money, I don’t necessarily mean flow of funds, but rather where are all the billions of dollars going to be spent in 2026? And believe it or not, they’re likely going to be in the same areas as they were in 2025.
First off, AI infrastructure. According to Jensen Huang, the godfather of AI, there’s going to be somewhere between $3 to $4 trillion spent on AI infrastructure investment by the end of the decade—in areas such as data center construction, electrical connectivity, heating and cooling solutions, and of course, power solutions. So that’s an area I want to follow and find the benefactors of all that spending.
But it doesn’t stop there. How about aerospace and defense? Certainly, the military operations over this past week have reminded us of the need for security across the globe. Countries are spending billions of dollars to upgrade, replenish, and modernize their security capabilities, and defense contractors should benefit from that.
I mentioned power. Where do you turn for power right now? Utilities—those that offer natural gas, nuclear, and even some companies now offering small modular reactors to supply data centers with nuclear power off-grid.
And finally, my more risky pick for the year in terms of following the money: biotech and health care. Health care innovation today typically comes from biotech companies, not large-cap pharma. Large-cap pharma is facing multiple headwinds—Congress pushing to lower drug prices and major revenue-producing drugs coming off patent and facing generic competition. To replace that lost revenue, they’re going to have to be acquisitive, in my opinion, which brings in small-cap biotech names.
Caroline Woods:
Okay. So if you want to follow the money and get exposure to some of these sectors, what’s the best way to do it—ETFs, thematic ETFs, or individual stock picks?
Kevin Mahn:
Sure. I’ll give you a couple of examples in each area. For AI infrastructure, one name we like is Comfort Systems, ticker symbol FIX. They’re an industrials company that supplies cooling solutions to warehouses and data centers, and they were just added to the S&P 500 at the end of 2025—another tailwind.
For power solutions, a couple of utility names that provide natural gas and nuclear distribution are Duke Energy, ticker symbol DUK, and NextEra Energy, which owns Florida Power & Light.
Shifting to aerospace and defense, one name that jumps out is L3Harris. They provide missiles and missile defense capabilities. We talk a lot about building our own Iron Dome in the U.S., similar to Israel’s, and L3Harris could be part of that solution.
Finally, for a small-cap biotech name, one we hold is Indivior. They provide drugs for treating substance abuse disorders and currently have two drugs in the FDA approval pipeline to treat opioid abuse—something our country desperately needs.
Caroline Woods:
Okay, so your theme for 2025 was growth opportunities ahead. How should we think about growth opportunities now? Notably missing from your picks are the Mag Seven names.
Kevin Mahn:
The influence of the Mag Seven on the S&P 500 and the broader market has been diminishing, and that’s good for the sustainability of this bull market. Three years ago, they accounted for 62% of the total return of the market, then 54%, and last year just under 44%. That broadening is healthy.
I’m not suggesting abandoning them entirely. Nvidia still sits at the hub of the AI ecosystem, and they reminded us at CES that they’re expanding into autonomous vehicles and robotics. I wouldn’t bet against them. But there are growth opportunities beyond the Mag Seven, and that’s a good thing.
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