The Passive Era Is Dying
The index is a lie. Passive flows are blind. BlackRock knows it. On February 13, Jay Jacobs, BlackRock’s head of thematic and active ETFs, signaled a pivot that institutional desks have whispered about for months. The market is no longer a monolith. It is a series of fractured, high intensity silos. Broad market beta is failing to capture the divergence between the winners of the energy transition and the losers of geopolitical fragmentation.
Thematic investing was once a retail gimmick. Now it is the only way to navigate a market where the S&P 500 is increasingly concentrated in a handful of names. But even that concentration is shifting. We are moving from the era of AI hype to the era of AI usage intensity. This is a technical distinction with massive capital implications. It is no longer about who builds the chips. It is about who can afford the electricity to run them.
The AI Usage Intensity Metric
Inference is the new battleground. For the past two years, the trade was simple: buy the hardware. Now, the market is scrutinizing the cost per query. High usage intensity means companies are burning through capital to maintain AI dominance. Per recent reporting from Bloomberg, the energy demand from data centers has reached a critical inflection point. The grid is the bottleneck. If a company cannot secure a dedicated power source, its AI roadmap is a hallucination.
We are seeing a decoupling. Software firms that cannot prove a return on AI investment are being punished. Meanwhile, the infrastructure layer is seeing unprecedented inflows. This is not a bubble. It is a structural re-architecting of the global economy. The intensity of usage is outstripping the capacity of the physical world to support it.
Geopolitical Fragmentation as a CapEx Cycle
Globalization is in retreat. Fragmentation is the new reality. This is not just a political talking point. It is a massive capital expenditure cycle. Supply chains are being ripped apart and rebuilt in friendly jurisdictions. This process is inherently inflationary. It requires massive investment in domestic manufacturing and defense. According to Reuters, global defense spending has hit a post-Cold War high as of this week.
Defense is no longer a cyclical play. It is a structural component of the new thematic framework. Investors are rotating out of consumer discretionary and into the ‘hard’ economy. Steel, semiconductors, and sovereign security are the new defensive plays. The fragmentation of the global order means that the old rules of comparative advantage no longer apply. Security of supply is now more important than the cost of goods.
The Thematic Divergence Table
The following data illustrates the performance gap between core themes as of mid-February. The divergence is stark. Energy and Defense are outperforming broad tech indices as the market realizes the physical constraints of the digital revolution.
| Investment Theme | 12-Month Return (%) | Volatility (Beta) | Primary Constraint |
|---|---|---|---|
| AI Usage Intensity | +42.5% | 1.8 | Grid Capacity |
| Defense & Sovereignty | +28.2% | 0.9 | Legislative Speed |
| Energy Infrastructure | +35.1% | 1.2 | Permitting/Copper Supply |
| Broad Market (S&P 500) | +12.4% | 1.0 | Interest Rate Sensitivity |
Visualizing the Capital Shift
The chart below represents the weighted investment flow into these critical themes as of February 14. Note the dominance of energy infrastructure as the foundational requirement for all other growth sectors.
Thematic Capital Allocation Index – February 2026
The Energy Wall
The grid is failing. We are seeing a massive rotation into utility-scale storage and small modular reactors (SMRs). The data center load is projected to triple, but the infrastructure is stuck in the previous century. This creates a scarcity premium for any firm with ‘behind-the-meter’ power generation. BlackRock’s focus on energy constraints is a warning. The ‘E’ in ESG has been replaced by ‘E’ for Energy Security.
Investors who ignore the physical limitations of the tech sector will be left holding overvalued software names. The real alpha is in the transformers, the copper mines, and the nuclear permits. Geopolitical fragmentation only accelerates this. You cannot have a digital economy without a secure, sovereign energy supply. The two are now inextricably linked.
Watch the upcoming March 15 Federal Energy Regulatory Commission (FERC) meeting. The decision on grid interconnectivity for hyperscalers will be the next major data point. It will determine if the AI usage intensity can continue its current trajectory or if we hit a hard ceiling on compute capacity.
