New trend in US stock rotation: "Anti-AI" stocks become safe haven, tech stocks are "abandoned"

As concerns among investors about the disruptive impact of artificial intelligence (AI) intensify, the U.S. stock market is experiencing a significant sector rotation. Companies whose business models are difficult to be replaced by AI technology—industries with “AI-resistant” characteristics—are becoming investors' new favorites, while tech stocks, which led a three-year bull market, are now facing increasing selling pressure.

By the close of Thursday this week, the S&P 500 had fallen about 2% over four days, with software stocks leading the decline with a cumulative drop of 9.9%, and the information technology (IT) sector down 3.9%. Meanwhile, homebuilders, transportation companies, and heavy machinery manufacturers posted strong gains; their related sector stocks rose about 6.1%, 4.8%, and 4.0% respectively. The consumer staples sector rose 5.2% in four days, on track for its best weekly performance since 2022.

The catalyst for this rotation trend is AI startup Anthropic’s launch of new tools, which have heightened investor fears that AI may upend the existing technology business models. At the same time, the Dow Jones Index, which includes many manufacturers and traditional economic giants, is gaining renewed appeal.

On Friday morning, all three major U.S. stock indices rose more than 1%. Early in the afternoon session, the Dow Jones once climbed over 1,000 points, up more than 2%, showing a stronger rebound than the S&P and the tech-heavy Nasdaq 100 Index. The Dow is set to close at a record high, reversing a three-week losing streak, while the Nasdaq is set to fall for a fourth straight week, the Nasdaq 100 for two weeks in a row, and the previously rebounding S&P will pull back.

This shift is overturning the core logic that has driven the U.S. stock market’s bull run for the past three years. Tech stocks once led the market with expectations that AI would transform the economy; now investors worry that many tech companies may fall behind in this transformation, making the tangible goods sector appear more attractive in comparison.

“AI-resistant” sectors on the rise

This week’s dramatic swings in the U.S. stock market highlight that investors are turning to sectors with “AI-resistant” characteristics.

JonesTrading Chief Market Strategist Michael O'Rourke wrote in his weekly report:

“Investors are rotating into sectors that are ‘AI-impact resistant’. These sectors have tangible businesses and real-world components. They are good choices for risk aversion; ‘plain vanilla’ stocks may have never been so appealing.”

Homebuilders and building product manufacturers are considered typical representatives of these traits.

Citi analyst Anthony Pettinari points out that the core activities of these sector stocks—manufacturing, distribution, and assembly—are not types of work that AI can replace. Although Pettinari describes sector earnings as “mediocre,” homebuilding and residential construction related stock indexes have risen over 10% since 2026, in sharp contrast to the S&P 500 which has risen less than 0.8% as of Friday.

Jay McCanless, an analyst at Citizens who researches homebuilders, said, “Ultimately, you still need humans to build homes,” adding that timing is favorable for the sector as it is spring home-buying season. “If tech stock rotation helps push up the share prices of the builders I cover, so much the better.”

Machinery manufacturers and transport companies also performed strongly, both hitting their best weekly performances since May 2025. For weeks, investors have been accumulating shares of companies such as Deere & Co. and FedEx Corp., buoyed by falling interest rates and U.S. economic resilience. Strong manufacturing data released Monday brought more optimism, just before investors began pulling out of tech and looking for other investments. Baird strategist Ross Mayfield noted this combination accelerated gains in industrial stocks.

Staples and chemical stocks favored

Consumer staples and chemical stocks are also considered “AI-resistant” companies. The consumer staples sector, comprised of companies like Dollar General Corp. and Dollar Tree Inc., has performed best among S&P 500 sectors this week.

Chemical stocks, which fell sharply in 2025 due to weaker demand and tariff issues, are now recovering. Investors hope business will improve, with chemicals’ key markets—manufacturing and homebuilding—set to expand in 2026. This has boosted Dow Inc., which produces chemicals for industrial, packaging, and materials use, and LyondellBasell Industries NV, which makes polymers, chemicals, and fuels.

Morningstar analyst Seth Goldstein said:

“Investors are eyeing a potential rebound in commodity chemicals’ earnings this year and, as demand recovery prospects improve, also see specialty chemicals as a more defensive choice, as we’re seeing money rotate out of tech and other high-growth sectors.”

As of Thursday, sector composite indexes for trucking, machinery, and consumer staples all hit record highs, while the Nasdaq 100 Index is down 6% from its all-time high set in late October last year. Early Friday, the Nasdaq 100, like the other major indexes, rose more than 1%, but for the week was still down more than 2% cumulatively.

Baird’s Mayfield added, if investors “take profits in software stocks, or sell off on AI outlook concerns, they have plenty of very good stock options to rotate into.”

Bank of America warns tech giants losing favor

Bank of America strategists say as tech giants lose appeal, U.S. small- and mid-cap stocks are the best bets before midterm elections.

The BofA team led by Michael Hartnett noted that U.S. President Trump has taken “aggressive intervention” measures to lower prices for energy, medicine, credit, housing, and electricity, which is pressuring industry sectors including energy giants, pharmaceuticals, banks, and tech giants.

BofA pointed out that the shift from an asset-light to an asset-heavy model means the dominance of the “tech seven giants” faces “a major threat.”

BofA estimates the big tech companies’ capital spending in AI will reach about $670 billion this year, which equals 96% of their cash flow, versus just 40% in 2023.

BofA strategists bluntly stated that these tech giants “no longer have the best balance sheets, nor the largest stock buybacks.”

As of Thursday, the Nasdaq 100 Index had fallen about 4.6% in three days, the biggest three-day drop since April 2025 when Trump announced so-called equivalent tariffs. Since the start of the year, the S&P 500 Index has lagged its equal-weight version by 4.2 percentage points, further confirming that a shift in market leadership is underway.

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