Sheryar Siddiq
11 min read
The market’s growth leadership has become abnormally concentrated in a small number of mega-cap technology stocks, leaving investors with fewer obvious opportunities to find rapid earnings growth outside of the AI trade. Ten AI-related stocks currently account for over 40% of the S&P 500’s market capitalization, with NVDA, AAPL, and MSFT accounting for approximately 21.7% of the index. That concentration has made non-tech growth stocks more appealing, but also more selective: a company can generate strong revenue growth while struggling to justify its valuation if margins, debt, customer concentration, or capital intensity are all trending in the wrong direction. The opportunity comes from identifying businesses with long-term growth that can support multiples rather than merely riding the broader AI story, something we previously covered in our 10 High Growth Stocks Outside Tech Analysts Are Bullish On article.
The case for looking beyond mega-cap technology is that large tech companies haven’t stopped growing. Their valuations already account for much of the predicted AI-driven earnings acceleration, while a number of healthcare, industrial, consumer, finance, and energy companies are growing at rates that may surprise investors.
According to Russell Investments, analysts anticipate the “Magnificent Seven” to increase third-quarter earnings by 20.3% year over year, while the other 493 companies in the S&P 500 are expected to grow by 27.7%. In other words, earnings momentum is broadening beyond the largest tech firms, potentially offering up opportunities for companies outside the AI trade.
The idea is to avoid using “growth” as a single metric. A company that grows revenue at 30% per year could still be a bad investment if it burns cash, relies on a small number of customers, or funds expansion through repeated dilution. Netskope is a good example: the cybersecurity company announced second-quarter fiscal 2027 revenue of $220.5 million, up 29.2% year-over-year, but trailing EBITDA remained negative at $721 million, and the stock traded at about 9x sales. That is, investors are paying a premium for ongoing top-line momentum as they wait for more proof that growth can translate into durable profits. In contrast, a company growing earnings in the high teens or low twenties can be appealing if it has pricing power, recurring revenue, a strong balance sheet, and a clear path to margin improvement.
The issue is that some companies have already been rerated as “AI adjacent,” even though their underlying earnings haven’t yet justified the premium. That’s why the best opportunities are typically identified where growth is still undervalued, rather than where the AI label has already done the majority of the work.
