$70 Billion. 18 Straight Outperforming Years | David Giroux on the Index Trap and AI Hype
Sat Feb 07 2026
David Giroux, CIO of T. Rowe Price and manager of the Capital Appreciation strategy, joins Excess Returns for a wide ranging discussion on market valuation, AI investing, Mag 6 dynamics, utilities, healthcare, fixed income, and how to think independently in volatile markets. David shares his framework for exploiting structural market inefficiencies, why market drawdowns can create opportunity, how he evaluates the S&P 500 at the micro level, and what investors are getting wrong about AI, profit margins, and the current cycle.
Main topics covered in this episode
• Exploiting structural market inefficiencies in GARP stocks, high yield, and double B credit• Why market drawdowns often lower forward risk and increase expected returns• Strategic equity allocation during periods of fear and volatility• Rethinking S&P 500 valuation through 500 company bottom up analysis• The changing composition of the index and its impact on profit margins• Where the most overvalued and undervalued areas of the market may be today• AI investing framework including Nvidia, AMD, cloud providers, and software risk• How AI could reshape margins, labor productivity, and enterprise software• Differences between today and the dotcom bubble• Overweight positioning in utilities and healthcare and the thesis behind each• Fixed income positioning including the belly of the Treasury curve and fiscal risk• Commodities, gold, and fiscal sustainability• Lessons for portfolio managers on independent thinking and making high conviction bets
Timestamps
00:00 Market drawdowns and forward returns02:09 Exploiting structural market inefficiencies06:28 Strategic equity allocation during selloffs11:22 Is the market expensive and how to value the S&P 50015:00 Profit margins and index composition17:13 Where valuation excess exists outside the Mag 620:38 How to think about AI and enterprise adoption27:18 AI disruption risk across sectors39:20 AI versus the dotcom bubble42:30 Apple versus Meta and capital allocation46:53 Overweight utilities and healthcare52:57 Fixed income opportunities and risks57:32 Commodities, gold, and fiscal concerns01:00:15 Lessons for new portfolio managers
More
David Giroux, CIO of T. Rowe Price and manager of the Capital Appreciation strategy, joins Excess Returns for a wide ranging discussion on market valuation, AI investing, Mag 6 dynamics, utilities, healthcare, fixed income, and how to think independently in volatile markets. David shares his framework for exploiting structural market inefficiencies, why market drawdowns can create opportunity, how he evaluates the S&P 500 at the micro level, and what investors are getting wrong about AI, profit margins, and the current cycle. Main topics covered in this episode • Exploiting structural market inefficiencies in GARP stocks, high yield, and double B credit• Why market drawdowns often lower forward risk and increase expected returns• Strategic equity allocation during periods of fear and volatility• Rethinking S&P 500 valuation through 500 company bottom up analysis• The changing composition of the index and its impact on profit margins• Where the most overvalued and undervalued areas of the market may be today• AI investing framework including Nvidia, AMD, cloud providers, and software risk• How AI could reshape margins, labor productivity, and enterprise software• Differences between today and the dotcom bubble• Overweight positioning in utilities and healthcare and the thesis behind each• Fixed income positioning including the belly of the Treasury curve and fiscal risk• Commodities, gold, and fiscal sustainability• Lessons for portfolio managers on independent thinking and making high conviction bets Timestamps 00:00 Market drawdowns and forward returns02:09 Exploiting structural market inefficiencies06:28 Strategic equity allocation during selloffs11:22 Is the market expensive and how to value the S&P 50015:00 Profit margins and index composition17:13 Where valuation excess exists outside the Mag 620:38 How to think about AI and enterprise adoption27:18 AI disruption risk across sectors39:20 AI versus the dotcom bubble42:30 Apple versus Meta and capital allocation46:53 Overweight utilities and healthcare52:57 Fixed income opportunities and risks57:32 Commodities, gold, and fiscal concerns01:00:15 Lessons for new portfolio managers