Mala Gaonkar argues the most profound applications of AI are improving non-tech industries. For example, AI has improved the accuracy and speed of medical scans by 70% and is transforming the 300 million surgeries performed globally each year through robotics, reducing errors.

While AI's market performance has been concentrated in the tech sector, its greatest future value will be unlocked as it transforms other industries like healthcare, logistics, and consumer goods. Buchwald believes investors are underestimating this broadening impact, which will create new winners and losers across the entire economy.

Contrary to expectations, analysis shows that sectors with low profit per employee, such as healthcare and consumer staples, stand to gain the most from AI. High-tech firms already have very high profit per employee, so the relative impact of AI-driven efficiency is smaller.

The strong performance of biotech stocks in late 2025 wasn't solely driven by sector-specific news. A significant factor was a macro-level rotation of capital from generalist investors moving money out of cooling AI and tech stocks and into the undervalued healthcare and biotech sectors.

Beyond the crowded AI trade, smart money sees opportunity in overlooked sectors. These include healthcare, which is at a 30-year low in relative valuation, and companies serving the middle-income consumer, a segment poised to benefit from upcoming tax reforms.

Instead of betting on unknowable AI winners, a better strategy is to find quality companies the market has written off as "losers" due to AI fears. Similar to the unloved "old economy" stocks during the dot-com bubble, these perceived victims could offer significant upside if the disruption threat is overblown.

The AI investment case might be inverted. While tech firms spend trillions on infrastructure with uncertain returns, traditional sector companies (industrials, healthcare) can leverage powerful AI services for a fraction of the cost. They capture a massive 'value gap,' gaining productivity without the huge capital outlay.

The healthcare sector's current struggles are not a recent phenomenon but a five-year trend of underperformance. This has culminated in its market cap weight in the S&P 500 dropping to 9%, the lowest level in three decades, signaling a significant, long-term investor rotation away from the industry.

The sectors poised for the biggest AI disruption are healthcare and education, which are currently inefficient and the largest contributors to U.S. inflation. AI promises to deliver personalized services in both fields at a fraction of the cost, creating a massive deflationary effect.