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Bloomberg <\/p>\n Bloomberg <\/p>\n
(Bloomberg) — A new group of stock winners has emerged as technology shares slide: Companies with businesses that artificial intelligence can\u2019t replicate.<\/p>\n
The S&P 500 Index has dropped 0.9% this week, pulled down by software companies as investors\u2019 concern that AI will disrupt those business models intensified following the rollout of new tools by startup Anthropic. At the same time, homebuilders, transportation companies and makers of heavy machinery posted strong gains. Consumer staples firms, already considered havens in a downturn, are up 5.2% and heading for their best week since 2022.<\/p>\n
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Each of those outperforming groups advanced again on Friday as the broader market recovered some of its losses. The Dow Jones Industrial Average, full of manufacturers and other giants of an older economy, outstripped the S&P 500 and the tech-heavy Nasdaq 100 Index. <\/p>\n
It\u2019s a reversal of the thesis that\u2019s driven the three-year bull market in US equities. Technology was long the market\u2019s juggernaut on the expectation that AI would transform the economy. Now, investors fret that many tech players will be left behind in that very transformation \u2014 and the world of physical goods looks more attractive by comparison.<\/p>\n
\u201cInvestors are rotating toward groups that are \u2018AI resistant.\u2019 These are groups that have physical, real-world components,\u201d Michael O\u2019Rourke, chief market strategist at JonesTrading, wrote in a note this week. \u201cThey are not a bad place to hide, and boring may never have been so attractive.\u201d<\/p>\n
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Homebuilders and makers of building products, for example, are seen fitting that bill. Citi analyst Anthony Pettinari noted that their core activities \u2014 manufacturing, distribution and assembly \u2014 aren\u2019t the kind of thing AI can replace. An index of homebuilding and residential construction-related stocks has rallied 13% in 2026, a sharp contrast to a 0.5% gain in the benchmark S&P 500, despite what the analyst called \u201cmediocre\u201d earnings.<\/p>\n
\u201cAt the end of the day, you still need humans out there building the homes,\u201d said Citizens analyst Jay McCanless, who covers homebuilders, adding that the timing is favorable for the group as it coincides with spring homebuying season. \u201cIf a rotation out of tech stocks is helping push the prices higher for my builders, so much the better.\u201d<\/p>\n
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Then there are machinery makers and transports, both heading for their best weeks since May. Investors had been rotating into companies such as Deere & Co. and FedEx Corp. for weeks, encouraged by falling interest rates and a resilient US economy.<\/p>\n
Strong manufacturing data delivered another dose of optimism on Monday \u2014 just before investors started yanking money out of the tech sector and looking for other places to put it. That combination spurred the rally in these industrials to accelerate, Baird investment strategist Ross Mayfield said.<\/p>\n
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Consumer staples and chemicals are also among AI-resistant firms, JonesTrading\u2019s O\u2019Rourke noted. The staples group, composed of companies such as Dollar General Corp. and Dollar Tree Inc., has fared the best among the S&P 500 sectors this week.<\/p>\n
Chemical stocks that suffered large declines in 2025 due to lower demand and tariffs, are now seeing a comeback. Investors hope that business will improve and that manufacturing and homebuilding, key markets for chemicals, will expand in 2026. That\u2019s lifted Dow Inc., which produces chemicals for industrial, packaging and materials applications, and LyondellBasell Industries NV, which produces polymers, chemicals and fuel products.<\/p>\n
\u201cInvestors are looking at commodity chemicals for potential rebound this year in profitability and improving outlook as demand recovers, and then looking at specialty chemicals as a more defensive play right now to the extent we are seeing a rotation out of higher growth sectors like tech,\u201d Morningstar analyst Seth Goldstein said.<\/p>\n
It all added up to a split-screen across the market this week. Baskets of truckers, machinery stocks and consumer staples all notched records, while by Thursday, the Nasdaq 100 had extended losses to 6% from its late-October all-time high. The tech-heavy index jumped 1.2% on Friday morning but remained down for the week.<\/p>\n
\u201cIf people are taking profits in software or selling software on the AI outlook, they have a lot of really good equity options to move into,\u201d Baird\u2019s Mayfield said.<\/p>\n
–With assistance from Janet Freund.<\/p>\n
(Updates index moves throughout. Adds references to Friday trading in third and 13th paragraphs.)<\/p>\n
Most Read from Bloomberg Businessweek<\/p>\n
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