Artificial intelligence impact has been the emerging story of 2026.
Many ASX and global technology shares have been heavily sold off already due to disruption fears.
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AI fears
The early tech sell-off has been a result of the fear that software and tech companies' main products and functions could be replaced by AI.
Should this happen, consumers would theoretically be able to access more affordable and efficient products rather than paying for the services of these companies.
At this stage, this fear is based largely on a prediction rather than proof.
However, some technology companies will undoubtedly be able to integrate AI into their existing systems, ultimately benefiting from AI advancements.
There have already been examples of this AI adoption by companies like Amazon and here in Australia WiseTech Global Ltd (ASX: WTC).
The bottom line is, investors have been rotating out of technology shares due to AI fears.
That means some tech stocks are at an all-time value due to misguided fear.
Meanwhile, others might have been correctly sold off as their products could truly be replaced in the near future.
How do investors know how to identify the two?
A new report from Vanguard has weighed in on how the investment company views this problem.
How to prepare for AI's economic ripple effect
In the recent report, Vanguard said AI's transformative impact is likely to extend well beyond the tech sector, creating widespread economic opportunities.
According to Vanguard, AI finds itself in a tug-of-war with another powerful, countervailing megatrend: fiscal deficits.
On one side, AI will potentially act as a powerful engine for growth, boosting productivity, innovation, and real GDP, and helping governments grow their way out of fiscal pain.
On the other side, structural fiscal deficits, driven largely by an aging society, create downward pressure by potentially driving up inflation and interest rates.
Based on this, there are two possible scenarios:
- AI wins: Productivity accelerates; growth surprises to the upside.
- Deficits dominate: Fiscal pressures weigh on markets and risk assets.
Vanguard's model shows that AI is likely to win the tug-of-war, potentially driving U.S. real GDP growth above 3%—a significant upgrade from current consensus forecasts.
However, the second-most likely scenario is that AI fails and deficits dominate, which would result in a lower-than-consensus growth outcome of around 1.0%.
Focus on companies using AI to maximum effect
Vanguard said when innovations like AI mature and diffuse through the economy, the biggest beneficiaries aren't necessarily the original innovators.
History shows that value rotates from technology creators to technology users which is the opposite of what many investors assume.
The companies building the new technology are the early winners, but over time return on equity (ROE) accrues to businesses that use it to boost productivity.
These forces help explain why value stocks have historically outperformed during the later stages of major technology cycles, when adoption broadens beyond the innovators.
This means the biggest gains may flow to those sectors and regions that aren't currently in the spotlight. Think financials, healthcare, and industrials—sectors where Australia shines.
Foolish takeaway
Based on the report from Vanguard, AI is not just a cycle, it's a mega trend.
Vanguard thinks of mega trends as those forces that are likely not just to affect markets but transform the economy and society.
Those driving the early growth may not be the companies set to benefit the most, as beneficiaries will be those companies that adopt and utilise AI to their advantage.
