<<THEME MUSIC>>
<<TRANSCRIPT>>
Oscar Pulido: 2025 was the year AI leapt from boardroom talking points to real world line items, and in 2026, that momentum only looks set to accelerate.
Jean Boivin: The scale of the Capex, we're talking about a range from $5-8 tn by 2030. That would make it the fastest capital build out ever. Not recent memory – ever!
Oscar Pulido: Companies are pouring record levels of capital into the infrastructure that will power this technology. Governments are reevaluating policy through the lens of productivity gains and competitive positioning, and markets are shifting as the ripple effects of AI spread through every corner of the economy.
Jean Boivin: The scale is so big that it is already driving the macro. And why? Because AI has been dominating everything else.
Oscar Pulido: But beneath the headlines lies a deeper story. How this massive AI build out intersects with corporate balance sheets, why traditional diversification may be losing some of its punch, and how investors can navigate a world where micro-dynamics are increasingly the macro picture.
Welcome to The Bid where we break down what's happening in the markets and explore the forces changing the economy and finance. I'm Oscar Pulido.
Today I'm pleased to welcome back Jean Boivin, head of the BlackRock Investment Institute to help us unpack the 2026 global outlook. We'll dig into the three big themes shaping BII’s view for the year ahead, and how other mega forces are set to evolve in 2026, and where he sees opportunities developing across markets outside of AI, like emerging economies, Japan and Europe.
Jean, thank you so much for joining us on The Bid.
Jean Boivin: It's great to be here.
Oscar Pulido: Well, believe it or not, the last time we had you on, we were talking about the outlook for 2025, and now we're talking about the outlook for 2026. I know the BlackRock Investment Institute has recently met with, all the investors from around BlackRock and got together to talk about the themes for next year. And in fact, there are three themes that the BII is talking about. What are those three themes that we should know?
Jean Boivin: So, it's great to be here, and let’s just put that a little bit into context. We've been talking for the last few years, and we'll talk more today about the fact that we're in an era of transformation, something we haven't been through for a very long time – decades - shaped by mega forces. But that has been creating an environment that has a couple of core features. Markets are driven by a very few forces at play, which makes them concentrated and leads to an environment where it's very difficult to avoid making big calls and there's no real place to hide or to be neutral.
Going into this year, that story's evolving, and we have three themes. The first one is that micro is macro. The sheer scale of what we're talking about in terms of AI build out is making this decision, having macro implications. The second is leveraging up. So, there's no way we can go on this transformation without having more debt and leveraging up. And that's going to have implication about investment opportunities. And the third theme is around the possibility of diversification mirage, the fact that we might be lured to diversification in some aspect where it's not really real, so things to unpack, but these are the three themes.
Oscar Pulido: And you mentioned mega forces, this is now a term that has been with us for a couple of years, and the BlackRock Investment Institute pioneered the thought of these big structural changes that are going on in the global economy that are going to have a big impact on markets and returns. While there were several mega forces that were talked about, it seems like a big focus of the 2026 outlook is centered on the mega force of artificial intelligence, AI. So, why is that? Why is it such a big focus for the outlook for the next year?
Jean Boivin: So, we had five mega forces. Mega means they're big, but it turns out that even within those mega forces, there's one that is dominating quite a bit now. And that's AI, as you say. Why is that? The scale of the CapEx, deployment that is already started and is running faster than we were expecting last year, and our outlook last year was putting out there pretty ambitious number. We went through them already, for the first year. The scale is so big that it is already driving the macro.
So, we look at growth in the US in 2025, and we got three times the contribution of non-recession investment than typically is the case. So that's all AI. We were sitting at this time last year, and we were debating about policy uncertainty that could lead to depressed investment- that was a consensus view back then. And yet, 2025 has been the massive investment boom. And why? Because AI has been dominating everything else, all the traditional macro aspects. So, the reason why this is so central to our theme is that it's driving everything. And in the outlook, you'll see, even though we have many topics we cover, on each of these topics, AI finds a way to bubble up.
Oscar Pulido: There are definitely a lot of mentions of AI as you read through the outlook and you talk about CapEx or capital expenditures that are sizable in amount. Remind us of what some of those numbers are. What have they been, what do you think they're going to be next year and what are the projections of the next couple years?
Jean Boivin: So, we are looking at, a range from $5-8tn by 2030. Again, this is ambition, it's not realized yet. If that happens, if we do get to these numbers by 2030, that would make it the fastest capital build-out ever. Not recent memory - ever. So, we're talking about something that is totally unprecedented,
Oscar Pulido: So, you mentioned the $5-8 trillion in terms of CapEx build-out by 2030. I think there's a question though that most people are asking and that even the markets were asking at that very end of 2025, particularly in November, we started to see a little bit of a pullback in AI stocks. They've done well over the course of the year, but they had a bit of a pause, and I think the reason is people are wondering, is AI in a bubble? How do you think about it when people ask that question?
Jean Boivin: Well, the first thing I'd say is, I don't think this is the right frame or the most useful frame for investors. Maybe we are in a bubble. Even when we are in a bubble, it takes a long time to know we're in one. And it's really only in hindsight that it's clear. But moreover, the reason why we're talking about this now is because we're talking about unprecedented numbers. So, these numbers I've just thrown out a minute ago are huge, and admittedly, you jump to, maybe it's too much, and maybe we're talking about bubble. But the potential for revenues that AI will generate, the potential transformative, implications of AI is also unprecedented. So, you need to look at both sides of the ledger, if you will, to make an assessment. And so rather than thinking about bubble, we think this is really about is we have a clashing of orders of magnitude that are going on right now. And it's about trying to reconcile them and see whether they can add up. We think this is the frame that we need to carry now in the next few years is keep reassessing whether the spending we see, maps or not with the potential revenues.
The bottom line is that you can see how at the macro level these numbers of spending, could justify themselves. You could see that happening, first by the tech existing business revenue line expanding, and I think there's room for that to happen but eventually it's going to be about AI leading to new pools of revenue in many parts of the economy. It should be transforming everything we do. And once you start to put some numbers on this, you can see that at a macro level, eventually, it could add up.
There are two conditions for that to happen and the first is we're going to need to see a breakout of growth from 2%. And I want to pause here because that's a big deal. But the reality is, if you look at the last 150 years in the US, the US has been at the frontier of innovation. and all of the innovation we've seen in the US, think of industrial revolution, electricity, internet, medical breakthroughs, all of this human ingenuity has just been enough to keep us on this 2% trend. We never broke out of it. So, saying that now we're going to be breaking out of it is a big statement to make. So, I don't think we should take that casually. However, we do think it's conceivable for the first time. because AI is something that is very special. The potential here is to accelerate the pace of innovation, so AI will help us innovate. And if that's the case, you could see how that can lead to, a faster breakthrough in science, and this is how you could get acceleration of innovation that leads to a breakout from 2%. So not a given, we'll need to track it, but for the first time, I think you can tell a conceivable story for why would happen. So that's the first piece.
Oscar Pulido: - you mentioned the 2% figure, and I just want to be clear, that's GDP growth in the US for the last 150 years has trended around 2%. And what you're saying is that the AI revolution, the AI megaforce, could cause that number to accelerate?
Jean Boivin: That’s exactly right. But the second part that needs to happen, is the fact that even if in the macro level we do generate all these revenues, it's not clear who's going to be able to extract or capture these revenues yet. So, now the tech industry will be able to capture some for some time but as it gets embedded in everything, it's going to be across sectors and it's going to be about competition for revenues across sectors. Who wins is unclear and that's why it's going to become a real alpha active story. So at the end of the day, we are bullish on, on AI still because even though these ambitions are big, we're just starting. And we're about an eight to a fifth of the scale eventually. We don't think that these companies or the build out will be on the autopilot. So as things play out and ambitions will be revised. And we'll need to track this, but it's way too soon in our view to, conclude that it's overdone. So, we're bullish on AI, which leads us to be bullish on risk more broadly, and that's how we go into 2026.
Oscar Pulido: Right, at its core, the concern about a bubble is that there's a lot of money being spent and will it generate a return on investment, particularly for the companies that are outlaying these big capital expenditures. And perhaps that's why you're saying the micro impacts, the macro. That's the first theme of the 2026 outlook.
So, let's talk about the second theme, which, you mentioned is leveraging up, which actually is also related to AI and talks about this observation that big tech firms, essentially these companies that are spending on capital expenditures towards ai, are starting to issue debt as a way to finance these big capital expenditures. Talk about why is that important and what is the implication for all this corporate debt being issued in an economy?
Jean Boivin: So, we think this is something that is profoundly changing the nature of the market environment. We're talking about a phenomenon where we are spending investing and building before we get the benefit and the revenues that will come down the road. So, there's a gap in timing between when you need to spend and the revenue will come by nature implies that we're going to have to bridge that. And the way to bridge that is to get more in debt or to lever up leveraging up. so that's what the real heart of it is this financing hump - and it's not good or bad. It's like, you buy a house, you don't have all the revenues immediately that will justify your investment, but over time you'll get it. And the only way to do it is to leverage up personally. so that's exactly the same analogy here. We're going to have to go through this phase, neither good or bad. And that's in the context where government balance sheets are already, leveraged up quite a bit. The system will be probably more sensitive to shocks that's going to come as a result. It's going to be a feature of this environment; we'll need to navigate that. It also means that because of the interplay between the government debt and now the leveraging up of the private sector, big moves in government debt yields, big moves in interest rate, could create more disruptions in the private sector as they leverage up.
So, that's the nature of where we're going. But it's important also to realize that we are starting from a corporate debt side that is extremely healthy, very healthy. So, it's not a red flag, again, it's not good or bad. I think there's room to move in that direction. But that also means a different kind of sensitivity of the markets which investor will need to be taking into account.
In terms of investment opportunities, this theme means that, we're going to be tapping more heavily in the source of financing as we leverage up, and the government will not be there to finance those as it might have been in another transformations. As a result, these diversification of sources of investment in financing, I think will be a structural tailwind that will continue to expand the role of private credit as a source of funding for these projects. And for investors as a result creates, ongoing opportunities. So that's one of the key theme implications. And then the other would be around government debt, in a leverage up environment. we are going to see, I think, pressure on yields to continue to go up. And this AI theme's going to be, over the medium term, inflationary. So that leads us to be a bit more careful on long-term yields and underweight long-term, US treasuries in particular.
Oscar Pulido: We've talked about equity markets and now we've talked about fixed income markets, and the commonality has been that it's AI related, right? We're talking about how the build out of AI impacts both asset classes, which makes me think when AI is such an encompassing theme in markets, at some point you do want to think about diversification and where do you think about diversification in this sort of market regime that we're in now?
Jean Boivin: Yeah, so that's our diversification, mirage theme here. And the point is that it's going to be, it is very difficult to find diversification because it's the nature of this environment that transformation, a couple of mega forces that are driving these markets. And, as I said, like you, you're either with or without, or not with, the, these force or you're with ai or you're not convinced and you're not, but you can't really be in a halfway house, or neutral.
So that's makes diversification very difficult, and it also creates this lure. It might be appealing. You might think you're doing diversification, but what really it is it's an active call against AI. It might be the right call, but if you do it, it should be with conviction. So, this is the mirage, right? So, there's something that is an active call but is being positioned as being something of a diversification.
Same thing and we've seen earlier this year around the fact that US policy uncertainty was creating some concern by global investors and they, there was an argument to say, well, maybe we should diversify away from the US have more in Europe and so on, might be the right thing to do, but that's not diversification. It's an active call. Taking a stance on what in the US versus the Europe. So, point is a lot of what used to be seen as diversification properly in the past might not be true diversification in this environment.
Instead, I think, we need to think about more creatively about diversification. So instead, we think there are strategies like market neutral strategies that are really like trying to be insulated from the broad market movements and try to generate alpha around this. It's not the traditional diversification, where you want to think about allocating in this environment, not to be fully exposed to the broad market movement. Another aspect is thematic that are likely to work in multiple scenarios. So, we think infrastructure is something that works across many of the mega forces and across many ways in which they might pan out. So, a thematic like this is probably more diversified in the sense that it works across more, portfolios.
And finally, this is stretching the idea of diversification, but fundamentally it's a world where we won't be able to diversify as much as we used to. We need to get on with the program and one real way to manage this is going to have to require to be thinking about more plan B and be ready to pivot. So that's not typical diversification, but that's an implication of this environment where with less diverse passive diversifier, we're going to need to more actively pivot and think about a plan B if the AI story becomes more challenge, for instance.
Oscar Pulido: And Jean let me come back to another theme that you talked about earlier. You were mentioning private credit and how tech companies are tapping the capital markets in order to fund their capital spending, and private credit is one of those ways. I actually think about one of the five mega forces while we've been talking about AI is the future of finance and that is private credit, but I think it also includes a few other themes within it that might play out in 2026? Maybe talk a little bit about what your views are there.
Jean Boivin: So, I think, beyond the private credit aspect in the future of finance, we're thinking about the reshaping of the financial architecture that is driven by financial innovation, digital financial innovation. And you can think about tokenization as a big part of it. The crypto landscape and clearly like stable coins is at is the core of this. It's been a big story in 2025. It's in its infancy in many ways. but it's on a very steep adoption curve, the adoption is widening, and now we're seeing that being integrated in mainstream payment system. This has been accelerated by policy and regulation in the US this year and we expect that to continue to broaden. We're going to see broadening of the access to the dollar, as a result of international adoption of stablecoin that are backed by US dollar assets.
And that is the beginning. We think there's going to be questions around how the financial system reorganized with itself around this. And that is still to be determined. 'cause these will make payment more accessible globally, but they will also mean that you can maybe store your savings, short term in a stable coin or have a portfolio between your bank account and your portfolio. So, there's going to be a competition that will appear with this. Banks might be starting to issue their own stable coin, so that's a pretty energetic space that is building out right now. Big theme. It's in its infancy, but with a lot of potential. It's not necessarily an investment story in stablecoin, but it's thinking about how does it shake up the financial system? And as a result, maybe, for instance, we think in European financials, all this digitalization in AI creates additional expected return for the sector. So, that's going to be about tracing out these impacts across asset class.
Oscar Pulido: That's definitely a new component to the global outlook that we haven't talked about in years past but speaks to why these are real structural changes that are going on in the economy.
Jean, we talked about micro is now macro, talked about leveraging up, we talked about diversification and the mirage of diversification. What are some other themes that investors should be considering over the next six to 12 months that maybe we haven't talked about thus far?
Jean Boivin: Yeah, so we talked about like, well, I think a lot about AI. But if you look more broadly, there's more, right? Japan, equities continue to be attractive to us. it's been a story over the last couple of years, we see that continuing. There's, corporate reforms still, having momentum. We're seeing growth catch up. And ultimately, even though the BOJ needs a continuing attention, might be sounding hawkish like they do, or they've done the recent past. Ultimately, I don't think inflation is a real problem in Japan. And so, we're going to see more fiscal support inflation that is benign. So, a pretty constructive environment. So, Japan, we like.
Europe is – and we need to make a nuance here that is actually very important - in terms of broad market exposure, we prefer the US but and we put out a paper recently on Europe and the investment renaissance that Europe might be eventually embarking on. Right now, it's more selective, so we see like sector, like finance, as I mentioned, healthcare, defense. These are pockets where we think there is, being overweight allocation makes sense. And great opportunities for investors already now. And then there's the potential as Europe builds out, more of the defense side. We see more fiscal support coming and if we move towards signs of greater capital market deepening, which is really the big thing there. If it were to happen, would be a game changer and would turn this selective story into a broader story. So, this is not yet on the table, but it's something to watch and could become more real over the course of 2026.
In EM, this is a story of 2025, we had massive return in EM in 2025, made possible by a weakening US dollar, clearly part of it this year. We continue to see, a stable dollar or mostly neutral but constructive for EM. Yields in the US that are still fairly low and as a result, help to a favorable backdrop to EM and their fiscal position overall is productive. So, EM is attractive, but we see that more on the hard currency debt side. So, these will be like the three kind of other areas I would mention, on top of everything else we talked about.
Oscar Pulido: Jean, we mentioned we haven't seen you since last year when you talked about the 2025 outlook, but we’ve spent a lot of time with your colleagues at the BlackRock Investment Institute who have guided us through geopolitical events, through the tariffs that were announced back in April, through some of the macro events that have happened throughout the course of the year. And then great to have you back as we look ahead to 2026. Thank you for giving us that guidance and thank you for doing it here on The Bid.
Jean Boivin: Thanks, Oscar. It's a pleasure to be here.
Oscar Pulido: Thanks for listening to this episode of The Bid. Over the holidays, we will be taking a break from our regularly scheduled weekly episodes, but we'll be dropping in a couple of episodes of Market Take, our weekly short form series from the BlackRock Investment Institute. We'll be back in January with brand new episodes. But from all of us here at The Bid, have a great holiday season.
<<THEME MUSIC>>
Spoken disclosures at end of each episode:
This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to the names of each company mentioned is merely for explaining the investment strategy and should not be construed as investment advice or recommendation. In the UK and Non-European Economic Area countries, this is authorized and regulated by the Financial Conduct Authority. In the European Economic Area, this is authorized and regulated by the Netherlands Authority for the Financial Markets. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures
MKTGH1225U/M-5033988
