In the first four days of this week, the S&P 500 fell by a cumulative 2%, software stocks dropped nearly 10%, while homebuilders surged over 6%, consumer staples rose more than 5%, and transportation companies gained nearly 5%. Analysts noted that investors are pivoting toward sectors described as 'AI-resistant,' whose business models are less likely to be displaced by AI technology. These sectors possess physical operations and real-world components. 'The appeal of “boring” stocks may never have been higher.'
As investor concerns over the disruptive impact of artificial intelligence (AI) intensify, the U.S. stock market is experiencing a significant sector rotation. Companies whose business models are unlikely to be replaced by AI technology – industries with 'AI-resilient' characteristics – are becoming investors' 'new favorites,' while tech stocks that led a three-year bull market are facing increasing selling pressure.
As of the market close this Thursday,$S&P 500 Index (.SPX.US)$the cumulative four-day decline was approximately 2%, with software stocks leading the decline by falling 9.9%, and the information technology (IT) sector declining 3.9%. In contrast, homebuilders, transportation companies, and heavy machinery manufacturers posted strong gains, with related industry stocks rising approximately 6.1%, 4.8%, and 4.0%, respectively. The consumer staples sector gained 5.2% over the four days, on track for its best weekly performance since 2022.
The catalyst for this rotational trend was the launch of new tools by AI startup star Anthropic, which heightened investor fears that AI would disrupt existing tech business models. At the same time, the Dow Jones Industrial Average, which includes many manufacturers and traditional economic giants, is regaining appeal.
In early trading on Friday, the three major U.S. stock indexes collectively rose more than 1%. The Dow Jones Industrial Average surged over 1,000 points at the start of the midday session, with a gain slightly above 2%, showing a stronger rebound compared to the S&P 500 and the tech-heavy$NASDAQ 100 Index (.NDX.US)$, set to close at a record high, reversing a three-week losing streak. Meanwhile, the Nasdaq Composite is poised for a fourth consecutive weekly loss, while the Nasdaq 100 will see a second straight week of declines. The S&P 500, which rebounded last week, is expected to retreat.
This shift has overturned the core logic that drove the U.S. stock market's bull run over the past three years. Tech stocks, which had long led the market due to expectations that AI would transform the economy, are now facing investor concerns that many tech companies may fall behind in this transformation. In contrast, the world of tangible goods appears more attractive.
The Strong Rise of 'AI-Resilient' Sectors
The volatile movements in U.S. stocks this week highlight that investors are shifting toward sectors with 'AI-resilient' characteristics.
JonesTrading Chief Market Strategist Michael O'Rourke wrote in a report this week:
“Investors are pivoting toward sectors that are 'resistant to AI impacts.' These sectors possess physical operations and real-world components. They are good safe-haven options, and 'unexciting' stocks may never have been more appealing.”
Homebuilders and building product manufacturers are seen as quintessential representatives of this characteristic.
Citi analyst Anthony Pettinari pointed out that the core activities of these industry stocks—manufacturing, distribution, and assembly—are not the types of jobs that AI can replace. Although Pettinari described the earnings reports of these industry stocks as 'mediocre,' indices related to homebuilding and residential construction have surged over 10% since entering 2026, forming a stark contrast with the S&P 500 index's performance, which has gained less than 0.8% as of Friday's intraday trading.
Citizens analyst Jay McCanless, who covers homebuilders, stated, 'At the end of the day, you still need humans there to build houses.' He also noted that timing is favorable for the sector, coinciding with the peak spring homebuying season. 'If the rotation in tech stocks helps push up the share prices of the builders I cover, that’s even better.'
Machinery manufacturers and transportation companies also performed strongly, both posting their best weekly performance since May 2025. Investors have been increasing holdings in companies like$Deere (DE.US)$ and$FedEx (FDX.US)$Companies such as Deere, FedEx, Dollar General, and Dow Inc., have been encouraged by the decline in interest rates and the resilience of the U.S. economy. The robust manufacturing data released on Monday brought additional optimism, just as investors began to withdraw from the technology sector and seek alternative investment opportunities. Ross Mayfield, an investment strategist at Baird, stated that this combination has driven an accelerated rise in industrial stocks.
Staples and chemical stocks gain favor
Consumer staples and chemical stocks also fall under the category of 'anti-AI' companies. The consumer staples sector, led by companies such as$Dollar General (DG.US)$ and$Dollar Tree (DLTR.US)$ , delivered the strongest performance among S&P 500 sectors this week.
Chemical stocks, which plummeted in 2025 due to declining demand and tariff issues, are currently recovering. Investors anticipate business improvements as key markets for the chemical industry—manufacturing and residential construction—are expected to expand in 2026. This has boosted companies producing chemicals for industrial, packaging, and material applications, such as$Dow Inc (DOW.US)$, as well as those manufacturing polymers, chemicals, and fuel products.$LyondellBasell Industries (LYB.US)$ 。
Morningstar analyst Seth Goldstein commented:
Investors are focusing on the potential rebound in profitability for commodity chemicals this year, alongside viewing specialty chemicals as a more defensive option amid improving prospects for demand recovery, as we see capital rotating out of high-growth sectors like technology.
As of Thursday, composite indices of sectors including trucking, machinery stocks, and consumer staples all hit record highs, while the Nasdaq 100 index fell 6% from its all-time high set at the end of October last year. The index also rose more than 1% during early trading on Friday, but it will still post a cumulative decline of over 2% for the week.
Baird's Mayfield noted that if investors 'take profits in software stocks or sell them due to concerns about AI prospects, they can rotate into many excellent stock options.'
Bank of America Warns of Declining Appeal for Tech Giants
Strategists at Bank of America stated that small- and mid-cap U.S. stocks are the best bets ahead of the midterm elections as tech giants lose their allure.
The Bank of America team, led by Michael Hartnett, noted that President Trump's "aggressive interventions" to lower prices in energy, healthcare, credit, housing, and electricity are pressuring sectors including energy giants, pharmaceutical companies, banks, and tech behemoths.
Bank of America pointed out that the shift from an asset-light model to an asset-heavy model implies a "significant threat" to the dominance of the U.S. "Mag 7" tech giants.
According to Bank of America estimates, large tech companies are spending approximately $670 billion on AI-related capital expenditures this year, equivalent to 96% of their cash flow, compared to just 40% in 2023.
Bank of America strategists bluntly stated that these tech giants "no longer have the strongest balance sheets or the largest stock buybacks."
As of Thursday this week, the Nasdaq 100 Index has fallen by about 4.6% over three days, marking its largest three-day decline since Trump announced so-called reciprocal tariffs in April 2025. Since the beginning of the year, the S&P 500 Index has underperformed its equal-weight version by 4.2 percentage points, further confirming the ongoing shift in market leadership.
Editor/Stephen
