Most of the analysts The Sunday Independent spoke to believed fears of a bubble in the sector were ‘overblown’, but caution was key
With global economic headwinds persisting, the focus in the year ahead will be on how AI optimism, trade frictions and evolving political risks define opportunities for Irish investors at home and abroad.
The Sunday Independent asked analysts from Irish stockbrokers Davy and Goodbody, wealth management firm Fordel, and UK-based investment bank Barclays, about their predictions for 2026.
The huge boom in artificial intelligence investments was a dominant investment theme heading into the year.
Most analysts agreed AI would continue to be a huge feature with potentially huge upsides.
“We expect AI to be the most important macro factor in 2026, as traditional drivers such as monetary policy and trade policy fade,” said Emmanuel Cau, head of European equity strategy at Barclays Investment Bank.
“The focus is increasingly shifting from pure technology builders toward companies enabling and adopting AI at scale.”
There are real fears of a potential AI bubble, with tech firms valuations soaring in value.
Any subsequent correction to those valuations, if profits fail to materialise, could result in swingeing losses for investors.
Most analysts agreed fears of a bubble were overblown, but being cautious was key.
Mr Cau believes the concerns over an AI-led correction are “overdone”.
“We expect the expansion to continue into 2026,” he said. “Earnings should make a comeback as the primary driver of returns for European markets in 2026.”
Oliver Moloney, chief investment officer with Fordel, said investors should be careful with areas of the market that have become very expensive or heavily concentrated, particularly some individual technology and AI-related stocks.
“While we don’t believe the overall market is in a bubble, sharp pullbacks are always possible,” he said.
“A market sell-off is likely to be focused on those areas of the market that are over-valued. We have already seen this play out somewhat in the second half of 2025.
“A good example is Bitcoin, in our view a risk sentiment barometer, which fell by 32% between October 6 and November 21.
“Oracle is another good example of an individual AI name that fell by 42% at its worst in the second half of 2025.”
Dudley Shanley, head of research at Goodbody, believes the big focus for global equity markets in 2026 is AI and whether or not the technology has resulted in a bubble in the equity markets.
Mr Shanley has his doubts.
“Unlike the dot-com bubble, the so-called AI hyperscalers such as Amazon, Google, Meta and Microsoft are all generating both profits and cash flow to fund their AI investments,” he said.
“There is no doubt that some of this investment will not deliver the returns expected in the short term, but putting it all together, we believe it is too early to call the bursting of an AI-related bubble.”
Mr Shanley believes an Irish-listed firm could benefit from AI. There are market trends set to boost others too.
“From an Irish equity market perspective, there are few companies that offer a play on the AI theme, with Kingspan being the clear outlier given its leading capabilities in data centre construction.
“Outside of Kingspan, the more muted global consumer and the more challenging UK macro environment have a disproportionate impact on many of the listed Irish companies,” he added.
“As such, we look to names that have significant domestic exposure, clear operational moats, and self-help opportunities. In that context, we also believe 2026 should be a good year for AIB, Cairn Homes and Ryanair.”
Aside from AI, what else are the experts keeping an eye on?
Trump’s trade tariffs were expected to pose significant challenges for European firms over the last year.
So far, many of the predictions of doom and gloom have yet to materialise.
Barclays’ Mr Cau said the market reaction suggested some of the worst fears were overblown.
“Policy uncertainty remains a source of volatility, particularly around tariffs and industrial policy,” he said.
“However, markets have turned the page on tariffs, reacting less to each headline, suggesting some adjustment has already occurred.
“Macro and geopolitical tail risks still abound, however, with politics continuing to influence sentiment and valuations.”
Mr Moloney agreed the markets have shown they can “look through political noise when economic conditions are stable”.
However, with US mid-term elections coming up – and two wars ongoing – politics and geopolitics will likely be the forces that bring about volatility.
“Areas such as defence, energy and infrastructure could benefit from policy priorities, while sectors that rely heavily on global trade may face more uncertainty,” Mr Moloney said.
The mid-term elections in the US are also set to have ramifications far beyond the States.
Aidan Donnelly, head of global equities at Davy, said Trump’s approach to the elections carries risk for the markets.
“The mid-term elections happen in November, and while Trump will want to let the economy run hot into these, in the hope that the Republicans can avoid defeat in one or both Houses of Congress, the risk will be if the bond market takes fright and we see yields moving higher.
“This would have a knock-on effect to investor sentiment in the stock market, but also to consumer sentiment in the economy.”
Looking ahead to 2026, Diarmaid Sheridan, head of research at Davy, believes the fundamentals for Irish-listed businesses remained supportive.
He noted the Irish Stock Exchange was up around 30% this year.
Cau is also optimistic about European and Irish businesses
“Key sectors such as housebuilding are expected to benefit from sustained demand and recent government initiatives aimed at addressing housing supply,” he said.
“Airlines, notably Ryanair, continue to pursue an ambitious growth trajectory, while the banking sector is well positioned to maintain solid performance into next year.”
Mr Cau is also optimistic about European and Irish businesses.
“There are several companies that stand out to us based on their fundamentals, earnings momentum and exposure to long-term structural themes,” he said.
“In Europe, we see strong interest in SAP and Adyen, each of which is supported by durable cash generation and positioning in areas such as enterprise software, digital payments and financial market infrastructure.
One of the key trends for the Irish Stock Exchange has been companies shifting listings to US markets
“In an Irish context, Flutter Entertainment and Kerry Group continue to screen well, reflecting global scale advantages and exposure to consumer and food innovation trends.
“These companies operate in segments where we see sustained long-term growth drivers.”
One of the key trends for the Irish Stock Exchange has been companies shifting listings to the more lucrative US markets.
The likes of Smurfit Westrock, Flutter and CRH have done just that, hoping share prices would benefit thanks to vastly greater liquidity.
Damian Roddy, head of capital markets at Davy, said more could be done to make Euronext Dublin cost competitive and encourage smaller IPOs.
“Continued focus on reducing barriers to investment and fostering a supportive environment for listings will be key to ensuring that Irish businesses secure global capital to scale and grow into global leaders to replicate existing listed entities such as Ryanair, Kingspan and Kerry Group,” he said.
“The capital markets ecosystem in Ireland has supported the growth and scaling of CRH, Smurfit and Flutter to become major international stocks.”