Yicai 2026-10-28 14:57:01 Listen to the news
Author: Hou Xintong Editor: Pan Yinru
AI trading continues to lose momentum globally.
A stock index tracked by Goldman Sachs, excluding artificial intelligence (AI), rose 12.4% last week, outperforming the S&P 500’s overall 12% gain during the same period. Many non-AI sectors of the S&P 500 have risen this month, while the S&P Technology Index has declined 7% so far this month. Notably, major investment firms such as Oppenheimer and Berkshire Hathaway have shifted their portfolios toward non-tech sectors.
The non-AI-powered index outperformed the market.
Data shows that as of October 22, Goldman Sachs’ proprietary index tracking the S&P 500, excluding stocks classified as “AI-enabled,” rose 12.4%, outperforming the S&P 500’s 12% gain. Goldman Sachs launched this index earlier this year in collaboration with S&P, excluding stocks of companies categorized as AI-enabled.
Technology and AI-related companies account for approximately 45% of the S&P 500. This high weighting has powered the index for years, but recently it has become a burden. The technology sector of the S&P 500 declined about 7% this month, while other sectors remained up.
Investors are concerned about the debt and equity issued by companies such as CoreWeave and Oracle. Meta Platforms fell 7% on Thursday to $648.85 and continued to decline on Friday, closing nearly 8% lower since its pre-earnings close. Just a month ago, it was only a few dollars away from its all-time high of $796, set in August 2025. This decline was primarily driven by the company’s earlier announcement of significant capital expenditures and plans to issue additional shares. The market fears that its escalating investments in AI could fuel a bubble.
Companies providing power and equipment for the expansion of AI data centers have also been severely impacted. Related companies such as GE Vernova, Bloom Energy, Vistra, and Quanta Services also experienced significant declines in the recent sell-off.
Later this week, the Federal Reserve will announce its interest rate decision, which will also influence market sentiment and the performance of AI stocks. Cui Xiao, Senior Economist at Pictet Wealth Management, told China Business Network that the Federal Open Market Committee (FOMC) is expected to hold rates steady at 3.75%–4.00% this week, with the overall policy signal aligning with the market’s widespread expectation of another rate hike in December. During the subsequent press conference, Fed Chair Walsh is expected to avoid directly commenting on AI-related market volatility but will reiterate his previous view that AI is currently boosting demand in the short term and will expand supply in the medium term.
AI is not only driving the stock market but is also becoming increasingly important in the credit market. Alyssa Irving, a fixed income portfolio manager at Wellington Management, told Yicai that while the large-scale infrastructure spending required for AI may still be in its early stages, its impact on the credit market is already becoming clear: increased capital intensity, greater credit supply, and heightened differentiation among industries and issuers.
For investors, she said, the challenge lies in distinguishing which companies can turn AI-related investments into sustainable returns and which cannot. As AI investment becomes an increasingly important driver of market performance, careful analysis of capital allocation, financing, and execution risk may be critical.
Although overall AI infrastructure spending supports credit demand, its impact varies significantly across sectors: investment-grade credit investors focus on balancing growth with rising capital intensity; high-yield credit investors observe growing divergence between issuers benefiting from AI and those negatively affected by it; and structured credit investors prioritize transaction structures and repayment assumptions.
“Therefore, investment opportunities in the credit market are becoming more differentiated, driven primarily by market dispersion rather than a general rise in risk,” she said. “Companies directly tied to AI infrastructure development—such as hyperscale cloud providers, semiconductor firms, and infrastructure suppliers—are generally benefiting from stronger growth, with some experiencing improved fundamentals. However, the situation is more complex for companies making large investments merely to remain competitive. If the path to realizing returns on these investments is uncertain, high capital expenditures could put pressure on cash flow and leverage metrics. This divergence may further intensify differentiation within the investment-grade credit market, underscoring the importance of issuer-level analysis and prudent capital allocation.”
Switch to non-tech sectors
For most of this year, Goldman Sachs’ proprietary index tracking the S&P 500—excluding stocks classified as “AI-enabled”—underperformed the S&P 500, as investors consistently favored chipmakers, cloud computing companies, and other beneficiaries of heavy AI spending. However, this advantage has been narrowing this month and vanished entirely last week.
Meanwhile, investors are shifting toward defensive sectors. This month, ETFs such as the State Street Consumer Staples Select Sector SPDR ETF, the State Street Health Care Select Sector SPDR ETF, and the State Street Utilities Select Sector SPDR ETF rose by 7% to 10%. The energy sector also rose overall by 10%.
Many analysts recommend shifting toward non-AI companies to achieve investment diversification and protect investors from further losses due to declines in tech stocks. In a report on October 24, Ari Wald, an equity analyst at Oppenheimer, wrote, “Over the past two weeks, the investment pendulum has swung toward non-AI stock exposure.” Oppenheimer’s current favored sectors are business services and insurance. Last week, the firm upgraded these sectors to Outperform and recommended several individual stocks within them, including Republic Services, Cintas, Verisk Analytics, Broadridge Financial Solutions, MetLife, and Arthur J. Gallagher.
Berkshire Hathaway is also shifting toward non-tech sectors, with its Class B shares rising 8% this month. Berkshire currently owns a number of operating companies, including insurance giant Geico and BNSF Railway. It also holds a $364 billion stock portfolio, including positions in Apple, Coca-Cola, Alphabet, and Bank of America. If tech stocks drag down the S&P 500, this diversified portfolio will help Berkshire continue to outperform the broader market.
Institutional research firm Trivector Research sees potential in "non-tech conglomerates," with pharmaceutical giant Eli Lilly being one of its favored investment targets. The stock has risen 22% due to strong performance of its weight-loss drug. The company is developing additional therapies, including a next-generation weight-loss drug planned for submission to the U.S. Food and Drug Administration for approval in early 2027.
The cruise operator Viking Holdings is also gaining increasing favor among institutional investors. At its August earnings call, the company stated that bookings for 2027 are rising, noting, “In recent events, our customers have demonstrated resilience.” Viking’s stock has risen 15% this year and may still have upside potential. The Wall Street average target price is $109, above its recent price of around $82. Barclays recently upgraded its rating to Overweight with a target price of $102.
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