The Era of Scarcity Returns
The narrative has shifted. It is no longer about the promise of silicon. It is about the reality of the socket. For three years, the market treated Artificial Intelligence as a software miracle. That illusion shattered this week. BlackRock’s recent signals indicate a pivot toward ‘usage intensity’ and ‘energy constraints.’ This is a polite way of saying the world is running out of power. Investors are moving from the cloud to the grid. The thematic plays of 2024 were about imagination. The thematic plays of 2026 are about physical limitations.
Jay Jacobs, BlackRock’s head of thematic and active ETFs, recently highlighted this transition on The Bid podcast. He pointed to a world defined by geopolitical fragmentation and defense spending. This is not a temporary spike. It is a structural realignment of global capital. The ‘Peace Dividend’ of the last thirty years has been fully spent. In its place is a permanent war economy focused on dual-use technology and energy sovereignty.
The AI Energy Bottleneck
AI is hungry. It is hungrier than the market anticipated. Current estimates suggest that data centers will consume nearly 10 percent of the total US electricity demand by the end of this year. We are seeing a decoupling of tech valuations from software sales. Instead, they are tracking transformer capacity and cooling efficiency. The bottleneck is no longer the H100 or its successors. The bottleneck is the substation. This is why we are seeing massive inflows into private energy infrastructure.
Large-scale language models require exponential increases in power for every marginal gain in reasoning capability. This is the ‘Usage Intensity’ problem Jacobs referenced. If the grid cannot support the inference loads, the valuation of the entire AI stack collapses. We are currently tracking a 15 percent deficit in projected grid upgrades versus the requirements of the top five hyperscalers. This gap is the most significant risk to the current equity bull run.
Defense Spending as a Macro Pillar
Geopolitics is no longer a tail risk. It is the primary driver of industrial policy. Fragmentation is the new globalization. We are seeing a surge in defense spending that mimics the early 1980s. However, this time the spending is not just for hardware. It is for autonomous systems and cybersecurity. Per recent Bloomberg market data, defense contractors are now trading at premiums usually reserved for high-growth SaaS companies. The market is pricing in a decade of procurement cycles driven by the need for domestic supply chain resilience.
This fragmentation creates winners and losers based on geography. The ‘Friend-shoring’ movement has matured into ‘Fortress-shoring.’ Capital is being repatriated to jurisdictions that can guarantee both physical and digital security. This is the ‘Defense Spending’ theme in its purest form. It is an insurance policy against a fractured global order.
Thematic Performance Metrics February 2026
The following table illustrates the performance of key themes as of February 19, 2026. The data reflects a clear preference for infrastructure and security over pure-play consumer tech.
| Investment Theme | YTD Return (%) | Volatility (30D) | Primary Driver |
|---|---|---|---|
| AI Infrastructure | +18.4% | 24.2% | Energy Grid Integration |
| Defense & Cybersecurity | +12.1% | 11.5% | Geopolitical Tensions |
| Energy Resilience | +9.7% | 15.8% | Nuclear SMR Adoption |
| Global Logistics | -3.2% | 19.0% | Trade Fragmentation |
| Consumer Discretionary | -5.4% | 21.3% | Inflationary Pressure |
Visualizing the Shift in Capital Allocation
The chart below represents the weighted intensity of institutional interest across the four pillars identified by BlackRock. Note the dominance of energy constraints as the primary concern for the current quarter.
Institutional Priority Index: February 19, 2026
The Technical Mechanism of Fragmentation
Fragmentation is not just a political buzzword. It is a technical reality in the semiconductor industry. We are seeing the emergence of ‘Sovereign Stacks.’ Countries are no longer content with buying chips. They want to own the entire design and fabrication process. This leads to massive redundancies. Redundancy is the enemy of efficiency but the best friend of national security. For investors, this means the ‘Efficiency Alpha’ of the 2010s is gone. It has been replaced by ‘Resiliency Alpha.’
BlackRock’s focus on these themes suggests that the passive indexation of the past may no longer be sufficient. When themes define market behavior, the correlations between disparate sectors tighten. An energy crisis in Europe now directly impacts the valuation of a software firm in California because of the interconnectedness of the global power grid and data center cooling requirements. This is the ‘Geopolitical Fragmentation’ that Jacobs warned about. It is a web of dependencies where a failure in one node cascades through the entire thematic ecosystem.
The next major milestone for this market occurs on March 12. The release of the Department of Energy’s updated ‘Grid Modernization Report’ will be the definitive catalyst for the next leg of the energy transition trade. Watch the ‘Interconnection Queue’ data in that report. If the backlog for new power projects continues to grow at its current 20 percent annualized rate, the AI trade will hit a hard ceiling regardless of how many chips are produced. The socket is the new silicon.
