Non-AI S&P 500 Stocks Outperform as Tech Trade Fades in 2025
Investors avoiding AI stocks are matching or beating the broader S&P 500 this year, raising questions about where to rotate next.
A version of the S&P 500 stripped of artificial intelligence-related stocks is outpacing the traditional index in 2025, a signal that the dominant trade of recent years may be losing momentum and that investors can find returns elsewhere.
The development marks a notable shift from the past two years, when AI-linked megacap technology names drove the bulk of S&P 500 gains. Investors who concentrated portfolios in those names are now seeing diminishing advantages over those who stayed away entirely.
Read more How the 2026 Midterms Could Shift the Muni Bond Market →
Market strategists point to sectors outside the AI complex — including areas that benefit from steady economic activity rather than speculative growth narratives — as potential beneficiaries if the technology trade continues to cool. Specific stocks within those sectors are drawing renewed interest from portfolio managers seeking to rebalance.
The fraying of the AI trade does not necessarily indicate a broader market downturn, but it does suggest that index-level returns may become more broadly distributed across sectors than they have been in recent memory. Concentration risk, long a concern for passive investors in cap-weighted indexes, could diminish if the rotation holds.
For retail and institutional investors alike, the question now centers on timing and sector selection — how aggressively to reduce AI exposure and which alternatives offer the best risk-adjusted returns if the tech rally does not resume. Continue reading at US Top News and Analysis.
