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Utilities, energy and materials stocks have emerged as winners from the AI anxiety gripping Wall Street, as investors fleeing sectors seen as vulnerable to disruption seek businesses with tangible assets.
The S&P 500 software sub-index this week tumbled to its lowest level since the immediate aftermath of President Donald Trump’s “liberation day” tariff announcement last April, losing $1.2tn in combined market capitalisation in less than a month.
The sector has borne the brunt of worries that new AI tools could upend entire industries. Those concerns have also rocked wealth managers and insurers.
But the S&P 500 utilities sub-index is up 9 per cent, while energy stocks have gained 23 per cent, as sectors with substantial physical assets find themselves suddenly back in vogue after years of underperformance relative to asset-light tech business.
“All these capital-light businesses that could scale historically are also the ones that could be easily disrupted,” said Guillaume Jaisson, European strategist at Goldman Sachs.
On the other hand, “capital-heavy businesses are difficult to replicate, it takes time”, Jaisson said.
“They are more insulated from the risk around AI,” he added, labelling the buoyant sectors as “Halo” stocks: heavy asset, low obsolescence.
The tech-heavy Nasdaq index rose 1 per cent on Tuesday as stocks rebounded from Monday’s losses, but moves in the software sector were mostly muted.
US software companies Intuit, AppLovin, Gartner and Workday have all dropped around 40 per cent so far this year. Power company Generac Holdings and glassmaker Corning Inc are among the S&P’s biggest gainers this year so far. Oil groups Exxon and Chevron are up more than 20 per cent in 2026.
In Europe, the biggest stock market winners this year have been defence and energy sector supplier Kongsberg Gruppen and oil tanker shipping company Frontline Plc, both rising about 50 per cent since the start of the year.
Goldman launched a new European basket of “capital intensive” stocks on Tuesday, with its constituents up 12 per cent so far this year, compared with a 6 per cent gain for the broader Stoxx Europe 600. The bank’s “capital light” basket, on the other hand, is down 2 per cent this year so far.
Chipmakers, miners and heavy manufacturers have also led this year’s nearly 13 per cent gain by an MSCI benchmark for emerging markets.
Alex Temple, a credit portfolio manager at Allspring Global Investments, said the flash sell-offs were a symptom of investors crowding into sectors they did not fully understand, and then overreacting to predictions of AI disruption — such as the blog post from Citrini Research that sparked Monday’s software meltdown.
“It’s late-cycle behaviour, a lot of people will be invested in things that they don’t know a lot about,” Temple said, adding that the software selling had been driven by “Fobo”, or the “fear of becoming obsolete” due to AI advances.
Capital-light business models were particularly sought-after in the low interest rate environment that followed the global financial crisis, as investors focused on easily scalable business models at a time of easy borrowing conditions.
But a rise in interest rates since the pandemic has put pressure on these valuations at a time when investment has increased in capital-intensive sectors such as defence and infrastructure.
“The thing that has been working best for the last 15 years is now the most vulnerable,” said Gerry Fowler, head of derivatives strategy at UBS. “The avoidance of things at the moment centres around: is your business based on intangibles and intellectual property?”
