Why Stocks Are Struggling: The AI Capital Crunch And What To Expect

Most U.S. stocks have been trending lower recently. As the chart below illustrates, the Dow, the S&P 500 Index, and the NASDAQ have logged healthy gains thus far in 2026. The highest YTD return has been in the NASDAQ (11.89%), which consists of approximately 3,500 companies. About 68% of the NASDAQ is in technology companies. In contrast, the Dow is an index with 30 large companies, with much less tech exposure (about 17%), but is still up nicely for the year (8.75%). Thus, the NASDAQ index has outperformed the Dow, so far this year, because of a higher exposure to tech companies. It’s interesting to note that at the end of the chart the Dow (purple line) has been trending higher while the NASDAQ (blue line) has been moving lower. This is due to the decline in tech stocks. Let’s look at why these stocks have been declining and what to expect moving forward.

Why Stocks Are Struggling

There are three main reasons stocks are struggling to rise. These include the war in Iran, the Russia-Ukraine war, and most important, the lack of capital required to fund the infrastructure needed for the A.I. buildout. Let me explain.

The War in Iran: Whether you agree or disagree with the decision to bomb Iran, oil and gasoline prices have risen over 40% since it began and diesel prices have risen more than 60% since then. Why? This war caused a reduction in supply, while demand for fuel remained strong. High demand with low supply is the classic definition of inflation. Higher diesel prices mean shipping companies have to pay more to transport goods to consumers. Higher gasoline prices mean some consumers are delaying travel plans and some are forced to make difficult choices between essential expenses and the cost of driving.

MORE FOR YOU

The stress imposed by these wars (i.e. higher inflation, lower consumer demand) could strain the U.S. economy and contribute to the next recession. However, the economy is still very strong, so a recession is not expected anytime soon.