AI destruction: the fear value investors are quietly buying

On paper, the first quarter of 2026 should have been a wreck. International equities had just come off a tremendous year, a war had broken out in the Middle East, oil prices were climbing fast, and a new wave of AI fear was tearing through global markets. For a manager who screens on valuation, that backdrop spells trouble.

John Goetz, portfolio manager at Pzena Investment Management, saw it differently.

“That investment opportunity outside the United States is still there,” he says. “It’s just shifting around a bit.” The proof was in the dispersion.

In a single quarter, Equinor nearly doubled, the staffing group Randstad fell more than 20 percent, and some software names dropped 60 percent.

The quarter that should have been ugly

Goetz frames 2025 as the essential context. Outside the United States it was “a tremendous year of positive momentum,” with international markets massively outperforming domestic ones. The character of that rally mattered.

Where US momentum was still tech-driven, the momentum outside America was value-driven, with financials among the strongest sectors.

For a valuation-focused investor, a year that good reads as a warning as much as a reward. “There’s more downside risk now,” Goetz says, “because everything went really high last year.”

Then 2026 arrived with two fresh shocks. The first was the conflict in the Middle East and rapidly rising oil prices. The second was what Goetz calls AI fear, ramping up hard. AI had been a powerful driver of positive momentum, and now the same force was working in reverse.

Economically, he concedes, “one could have guessed that the first quarter could have been a very negative quarter.” It was not. The quarter “actually wasn’t that bad performance-wise,” and his own portfolio outperformed. Rather than play economist, he goes to the micro level, to individual companies.

Energy did the heavy lifting

The clearest winner was Equinor, the large European gas producer, which “ended up being almost a double in the quarter.” Oil prices rose and the portfolio owned the exposure.

But Goetz draws out a longer-term point the quarter brought into focus. Security of supply has become a central concern for European energy buyers, and Equinor’s pipeline links to European consumers now look like a structural advantage rather than a footnote.

“That’s one of the things we knew about the business,” he says, “but it really showed up in the first quarter.” The discipline now, he says, is to take money off the table where it has paid and redeploy it where the opportunities are moving.

AI fear is doing the real damage

If energy was the quarter’s tailwind, AI was its wrecking ball, and not mainly inside Goetz’s book. “The destruction outside our portfolio is way bigger than the destruction inside a portfolio,” he says.

The numbers are startling. Some software companies fell 60 percent in a single quarter. Accenture is down almost 50 percent over a couple of years. Inside the portfolio the hits were real too.

Randstad, the European staffing company, was the single largest underperformer, down more than 20 percent as investors concluded AI would make human staffing obsolete within five years. Goetz thinks those fears are overdone, “but it didn’t stop the stock from going down.”

Publicis, the global advertising and consumer-connection consulting leader the firm has started buying, was hammered as well. “This AI fear is not tiny little 5 percent changes,” he says. Caught in the crosshairs, a stock can see “valuation moves and volatility really through the roof.”

“We like extreme volatility because typically we take advantage of excess of fear. Doesn’t matter what the industry is or what the driver is.”

Last year’s momentum is proving fickle

The other lesson of the quarter was how quickly momentum can reverse. The strongest momentum outside the United States last year sat in the financial sector. Under the weight of economic uncertainty and high energy prices, Goetz says, “that has backed out.”

His example is Deutsche Bank, which Pzena does not own. The weakest end of the European financial sector by his reckoning, it was nonetheless the best-performing financial in Europe last year, and is now hard hit by economic fear.

The episode underlines a point value investors return to often. Momentum is fickle, prone to overcompensating and swinging around a lot, and what looked like leadership a year ago can become the first casualty when the mood turns.

The fear becomes the screening tool

This is where Goetz turns the disruption into a process. As value investors, he says, “we like that.” AI fear, he explains, “is becoming the agent of new research for us,” outside the United States and even more so within it. The job is to separate two things the market is treating as one.

Some businesses genuinely face permanent impairment from AI and have to be avoided. Others are simply “getting thrown out with a generic fear” even though their core value add does not depend on the software being disrupted.

The firm has begun acting on the distinction. On the buy side it started a position in Accenture, dismissed by the market as irrelevant to the technology shift, when Goetz argues the opposite is true.

Accenture helps companies large and small navigate exactly these transitions and will be part of the AI build-out. “AI destruction will be a feature” of the ideas now arriving in the firm’s most attractive quintile.

On the sell side, the biggest trim was Samsung, which has swung from AI loser to AI winner as the market belatedly recognises that memory is central to running AI at scale. Pzena is monetising that re-rating.

The thread running through the quarter is that the labels are moving faster than the businesses behind them. A loser becomes a winner, a leader becomes a casualty, and a generic fear sweeps good companies out with the genuinely impaired. Sorting one from the other, Goetz suggests, is the work.