INNOVATION STEERS GROWTH IN UNCHARTED WATERS

Jennison's Mark Baribeau explains how investors can leverage enduring secular demand drivers to navigate macro challenges and seize opportunities in the next wave of AI monetization.

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Despite fluctuations driven by macroeconomic uncertainty and ongoing questions about AI investment monetization, 2025 proved to be a robust year for global equity markets. Markets are likely to remain fluid in 2026, shaped by evolving macroeconomic factors, geopolitical shifts, and rapid technological innovation. Against this evolving landscape, it will be important to focus on enduring secular demand drivers and high-quality companies, such as those providing tangible AI monetization opportunities.

 

NAVIGATING CROSSCURRENTS

Despite elevated valuations, earnings growth continues to favor growth stocks, underscoring their relevance in portfolios. Selectivity will be key as headwinds from shifting fiscal policies, trade tensions, and persistent inflationary pressures are expected to contend with tailwinds from resilient corporate earnings, strong consumer demand, and widespread implementation of advanced technologies. Investor confidence may strengthen as central banks adopt more accommodating policies. Focusing on companies with wide competitive moats, innovative R&D pipelines, and the ability to scale AI solutions globally can help weather challenges and deliver long-term value in this rapidly evolving market.

 

EARNINGS GROWTH ESTIMATES FAVOR GROWTH STOCKS

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Source: FactSet as of 11/30/2025. Russell 1000 Growth (Growth) and Russell 1000 Value (Value).
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Source: FactSet as of 11/30/2025. Russell 1000 Growth (Growth) and Russell 1000 Value (Value).

A NEW WAVE OF AI MONETIZAITON

Generative AI is changing course from an investment perspective, transitioning from infrastructure buildout to monetization through groundbreaking applications that enhance productivity and reshape entire industries. Software and search platforms leveraging AI for enterprise and productivity solutions are fostering growth, while demand for scalable, secure cloud infrastructure remains pronounced among businesses embedding AI into their core operations. The emergence of autonomous AI agents is driving innovation in customer service, logistics, and product development.

 

DIVERSITY BROADENS DURABILITY

Investing in companies that span multiple secular themes, driven by innovative products and strong competitive advantages, can help investors better seize opportunities in the next phase of the growth cycle.

Transformational technologies: While initial AI investment focused on infrastructure and computing power, the focus is shifting toward applications that are set to redefine industries. Companies are leveraging AI to accelerate product development, enhance customer experiences, and extract richer, more actionable insights from data.

Generative AI: The rise of autonomous AI agents promises to revolutionize customer service, logistics, and product development.

Technology enablers: Technology-driven manufacturing and automation are boosting productivity, while global policy momentum is accelerating the benefits of electrification.

Consumer brands: Consumer brands face headwinds as demand softens in price-sensitive segments. Leading luxury names continue to demonstrate durable pricing power and sustained growth, supported by strong brand equity and affluent consumer demand.

Fintech platforms: Emerging markets are driving demand for innovative, affordable, and accessible financial services, which remain less exposed to tariff pressures than traditional goods.

Health care innovation: Health care innovation remains a major opportunity, powered by AI-driven drug discovery, mainstream personalized treatments, and advanced data analytics.

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Against this evolving landscape, it will be important to focus on enduring secular demand drivers and high-quality companies, such as those providing tangible AI monetization opportunities.

Mark Baribeau, CFA, Head of Global Equities, Jennison

<p><i>Against this evolving landscape, it will be important to focus on enduring secular demand drivers and high-quality companies, such as those providing tangible AI monetization opportunities.</i></p>

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