By Teresa Rivas

"An investment in knowledge pays the best interest," said Benjamin Franklin. But he didn't have to contend with artificial intelligence.

There are many aspects of the recent selloff that are concerning, with anything tangentially threatened by AI getting hit hard. Perhaps the most worrisome, however, is the fact that virtually no knowledge-based company appears to be safe. Software stocks are just the tip of the iceberg, with panic spreading to everything from legal providers to business information, real estate investment trusts, and logistics companies.

"This matters since the main comparative advantage of the U.S. economy and U.S. equity markets has been as a genuine leader in the 'knowledge revolution,'" writes Gavekal Research Founding Partner and Chief Executive Officer Louis Gave. "So, if the market is suddenly no longer rewarding the large number of knowledge companies in the same way it used to, this is really bad news for the U.S. equity market, whose valuation is rather stretched by any (non-knowledge-adjusted) measures."

Part of the American exceptionalism bull thesis that has prevailed in recent years rests on the idea that while other countries may be able to replicate breakthroughs in AI more cheaply, the U.S. remains at the forefront of the knowledge economy, making it unmatched in the intellectual arms race. If knowledge suddenly isn't worth paying for, then it's hard to justify paying a premium for U.S. stocks. Even after the recent selloff, the S&P 500 is trading at more than 21 times forward earnings -- certainly high by historical standards.

As Gave notes, "so much of the valuation of the U.S. equity market is based on intangibles and the belief that 'knowledge' is the most important of assets." For most of human history, that's been true; the difference now is that "thanks to AI, knowledge is suddenly ubiquitous and 'free.'" Hence the rapid shift toward makers of physical goods and tangible assets. The U.S. can still claim some of those companies, but by and large that kind of market trend would be much more beneficial to the rest of the world. In other words, it's another leg of the Sell America trade.

"Rather than solidifying US dominance over global financial markets -- the consensus opinion until five minutes ago -- it increasingly looks as if the spread of AI is instead destroying US outperformance," Gave concludes. "Or to put it in other words, AI seems to be yet another example of a revolution that ends up eating its own children."

ChatGPT can't compete with Alanis Morissette, but if nothing else, it won't struggle to come up with examples of irony.

Write to Teresa Rivas at teresa.rivas@barrons.com

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February 13, 2026 14:53 ET (19:53 GMT)

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