Investors who steered clear of the artificial intelligence boom this year are performing just as well as those holding the broader market, as a sharp retreat in technology shares prompts a major rotation into defensive and value-oriented sectors.
According to data tracked through Oct. 22, a proprietary benchmark developed by Goldman Sachs in partnership with S&P—which strips out stocks classified as "AI enablers" from the S&P 500—climbed 12.4% year-to-date, as reported by CNBC Business. That performance briefly overtook the traditional S&P 500's 12% gain over the same period before pulling neck-and-neck following mixed trading sessions.
The Shifting Tech Trade and Capex Concerns
For nearly two years, mega-cap technology and semiconductor companies carried major indices higher. Tech and AI-related companies currently account for approximately 45% of the S&P 500's total weighting. However, that heavy concentration has transformed into a drag during recent weeks, with the S&P 500 technology sector sliding roughly 7% over the month.
Market participants have grown increasingly cautious about ballooning capital expenditures and high-yield debt issuance. High-profile infrastructure players and cloud operators have faced sharp reassessments. For example, shares of Meta Platforms fell nearly 7% after the company disclosed intentions to issue additional shares and expand its capital expenditures. Equipment and power suppliers that previously surged on data center buildout projections—including GE Vernova, Bloom Energy, Vistra, and Quanta Services—also absorbed steep declines.
"The AI pendulum has swung back in favor of non-AI exposure over the last two weeks," noted Ari Wald, technical analyst at Oppenheimer, pointing to a distinct structural rotation toward neglected corners of the equity universe.
Benchmark Comparison: AI vs. Defensive Portfolios
The Goldman Sachs ex-AI index takes the S&P 500 universe, strips out hardware, semiconductor, and software firms deemed direct AI enablers, and recalculates standard capitalization weightings for the remaining constituents. While this gauge trailed the tech-heavy market for most of the year, recent defensive gains closed the gap completely.
| Index / Sector Metric | October Performance Trend | Year-to-Date Return (Through Oct. 22) | Key Exposure Profile |
|---|---|---|---|
| Goldman Sachs S&P 500 Ex-AI Index | Resilient / Advancing | +12.4% | Equalized non-tech broad equity |
| Standard S&P 500 Index | Mixed / Stalling | +12.0% | ~45% AI and Tech Weighting |
| S&P 500 Technology Sector | Down ~7% (Month) | Moderating | Chipmakers, Mega-cap Platforms |
| Consumer Staples Select SPDR | Up 7% to 10% (Month) | Accelerating | Defensive Consumer Goods |
| Health Care Select SPDR | Up 7% to 10% (Month) | Steady | Pharmaceuticals, Healthcare Providers |
| Utilities Select SPDR | Up 7% to 10% (Month) | Rebounding | Regulated Power, Clean Utilities |
Where Capital Is Rotating
As investors de-risk from concentrated tech allocations, traditional defensive exchange-traded funds (ETFs) have captured significant inflows. The State Street Consumer Staples Select Sector SPDR ETF, State Street Health Care Select SPDR ETF, and State Street Utilities Select Sector SPDR ETF each climbed between 7% and 10% during October, according to portfolio metrics reviewed by CNBC market coverage.
Energy shares advanced roughly 10% over the same monthly timeframe, supported in part by geopolitical friction surrounding Iran, rather than domestic economic factors alone. Financial analysts evaluating non-tech compounders point to durable industry leaders such as healthcare giant Eli Lilly as viable hedges against prolonged tech softness. Oppenheimer's technical research specifically highlighted commercial services and insurance as two industries showing favorable relative momentum.
Portfolio Adjustments if Tech Stalls Further
If the technology retreat persists, institutional strategists recommend using the broad non-AI market for portfolio diversification. Rather than attempting to time individual semiconductor earnings, diversified exposures allow market participants to capture corporate earnings growth without taking on the concentration risk inherent in market-cap weighted indices dominated by 45% tech allocations.
Investors evaluating next steps are actively balancing non-correlated assets, dividend-paying consumer staples, and infrastructure providers disconnected from speculative computing demand, as documented by CNBC's analysis on market breadth.
Frequently Asked Questions
What is the Goldman Sachs ex-AI Index?
It is a benchmark that takes the S&P 500 universe, excludes companies classified as direct "AI enablers," and applies standard S&P weighting methodology to the remaining companies.
Why did the standard S&P 500 slow down compared to non-AI stocks?
The standard index carries an approximate 45% weighting in technology and AI-related companies. As the technology sector fell roughly 7% in October over heavy capital expenditure concerns, the broader index's gains were muted.
Which sectors are gaining as tech drops?
Investors have rotated into consumer staples, utilities, and healthcare, with sector ETFs in these categories rising between 7% and 10% over the month, alongside strength in energy and commercial services.
