The tech wreck continues.
The good news is that there are many safer places for investors to flock to as the AI trade seemingly unravels. Sectors like healthcare, financials and energy could be worth a look thanks to a mix of strong earnings momentum and reasonable valuations.
Worries about rising corporate bond yields for artificial-intelligence cloud company CoreWeave, a key customer of Nvidia, are leading AI-related stocks in the tech and communication services sectors lower again on Thursday.
While the overall Nasdaq was only down about 0.4% Thursday, it has fallen more than 2% in the past five days. Chip stocks have been hit particularly hard. The iShares Semiconductor ETF, which has Nvidia as its top holding, is in the midst of an eight-day losing streak and has fallen 14% during that stretch.
Semiconductor stocks have been the biggest beneficiaries of the artificial-intelligence buildout, and now they are most vulnerable to further market turmoil. Micron is up nearly 220% in 2026 despite its recent pullback. The Roundhill Memory ETF, a fund that just launched in April and owns big positions in Micron as well as South Korean rivals Samsung and SK Hynix, has gained about 75% since its debut.
Nothing grows to the sky. It may be time for investors to pivot to other parts of the market.
Jim Paulsen, a former market strategist for Wells Fargo and the Leuthold Group who now writes a Substack column, thinks that investors should load up on stocks in the other nine sectors, a group that he calls Old Era companies. Tech and communications services stocks such as Apple, Microsoft, Alphabet and Meta Platforms, conversely, are New Era companies.
Paulsen wrote in his Substack Thursday that beta -- a measure of how volatile a stock or sector is compared with the broader market -- for the companies outside of the tech and communications services sectors is now essentially zero. In other words, non-tech stocks aren't moving much even when AI stocks fall.
What that means, Paulsen notes, is that most stocks "have been essentially invariant to the daily price movements among New Era stocks." His takeaway? "If New Era stocks did head into a period of severe downside turbulence, most Old Era stocks may be far more resilient than most anticipate."
So even if chips, the big hyperscalers in the Magnificent Seven and so-called neocloud companies like CoreWeave continue to fall, oil stocks, banks, healthcare and other sectors could pick up the slack.
"The current bull run has been far more bifurcated," Paulsen wrote. "Consequently, it's possible the S&P 500 may weather any significant decline in New Era stocks far better than in the past." That's despite the fact that the largest 10 companies in the index make up about 40% of its weighting.
While the S&P 500 is down 1.1% in the past five trading days, that is almost entirely because of a 4.8% drop in the Information Technology sector, which includes Nvidia, Broadcom and Micron as top stocks. The Communication Services sector, which has Meta Platforms and Alphabet as its biggest weightings, has fallen slightly too.
Shares of industrial stocks and consumer discretionary companies have also taken a hit in the past week. But the rest of the market is holding up just fine.
Energy stocks have surged nearly 7%. Consumer staples firms, companies like Coca-Cola and Procter & Gamble that are both relatively stable and known for big dividend yields, are up 5.6% in the past five trading days.
Healthcare stocks are up 3%. Adam Parker, founder of Trivariate Research, is bullish on the sector, in part because it's a way to diversify beyond the AI trade.
"Healthcare equipment and services, along with pharmaceuticals, have shown low correlations to AI revenue beneficiaries, providing exposure to different performance drivers," Parker wrote in a report Thursday. He recommends Merck, biotechs Regeneron Pharmaceuticals and Corcept Therapeutics as well as medical equipment firm Bio-Rad Laboratories, for example.
Real estate, another bond proxy sector that offers income investors solid yields, has gained more than 2%. Materials, utilities, and financials are all up more than 1% as well.
"There may be several places to hide out during any pending New Era collapse," Paulsen said.
Others expect this trend to continue. David Royal, chief financial and investment officer for Thrivent, told Barron's that investors should "diversify as much as possible." He thinks investors should consider adding to industrials and financial firms, for example.
Royal also said that real estate investment trusts, or REITs, are a good way to "generate income and as an inflation hedge," and added that energy stocks still look interesting in light of elevated crude prices.
Funds focusing on these sectors are the best ways to invest in a broad group of these stocks. So investors should consider the State Street Real Estate Select Sector SPDR, State Street Utilities Select Sector SPDR, State Street Materials Select Sector SPDR, State Street Industrial Select Sector SPDR and State Street Financial Select Sector SPDR ETFs.
The valuations for many of these sectors look compelling too. Financial services, materials and real estate stocks trade for between 14 and 16 times 2027 earnings estimates.
You get the picture. Tech, especially chip stocks, may be getting crushed lately. But a swath of the rest of the market is shrugging off worries about AI.
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