AI Hype Isn't Cutting It Now: Investors Want AI-Immune 'Real Economy' Stocks

That was sudden. The Anti-AI or AI-Immunity trade is upon us. Investors were spooked by Anthropic's demonstration of disruptive potential a couple of weeks ago and have been jittery ever since. The problem is, as knowledgeable investors will admit, that no one has any real idea who's going to benefit or be devastated by AI. But one thing is for certain: the hype machine claiming 'trust us, you don't need to worry your pretty little head about the epochal hugeness of AI' is no longer sufficient. 

This is not a rejection of AI per se. It is, instead, a rational demand by prudent investors for proof of concept which includes operational performance leading to better than expected financial outcomes. Which, come to think of it, is exactly what business and investing are supposed to be about. JL

Hannah Lang reports in the Wall Street Journal:

After a three year love affair with anything related to AI, US investors are flocking to companies that have strong odds of surviving the AI revolution. In the past month, the industrials, materials, utilities and consumer staples have surged ahead of the overall index, while information technology has slid while Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla have languished, a rotation into real economy shares that has been under way for months. Through Feb. 20, the consumer-staples sector has notched its best year-to-date performance on record. Left behind are the perceived victims of the AI revolution, from wealth managers to software. "We don’t have any real idea who the [AI] losers are going to be. The next chapter is going to be defined by companies proving it. Hype isn’t cutting it anymore."

After a three-year love affair with anything related to artificial intelligence, U.S. investors are flocking to the factory owners, fast-food restaurants and commodity companies that have seemingly strong odds of surviving the technological revolution intact.

Call it the AI immunity trade, HALO—for “heavy assets, low obsolescence”—or just another iteration of the jitters that have periodically rippled through markets since the AI investing boom began. The winners include McDonald’s, Exxon Mobil XOM 2.36%increase; green up pointing triangle and tractor maker Deere DE -2.36%decrease; red down pointing triangle. Left behind are the perceived potential victims of the AI revolution, a list that has ranged from wealth managers to software firms.

In the past month, the S&P 500 sectors for industrials, materials, utilities and consumer staples have surged ahead of the overall index, while information technology has slid and the Magnificent Seven tech giants—Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla—have languished. Through Feb. 20, the index’s consumer-staples sector has notched its best year-to-date performance on record.

 

“These are the companies that you cannot type something in a prompt and disrupt,” said Josh Brown, chief executive at Ritholtz Wealth Management, who coined the term “HALO” earlier this month. “Whenever there’s a wave of uncertainty, all of the things that people were confident about require a repricing.”

Though the S&P 500 has eked out a positive return for 2026 so far, moves in the benchmark have masked sometimes-violent shifts beneath the surface, with traders fleeing the industries they suspect are under threat of major disruption.

One example took place in early February, after AI startup Anthropic announced tools to help automate legal and research tasks. That erased some $300 billion in value from software, financial-data and exchange stocks.

The next week, similar fears dragged down the shares of wealth managers, insurance brokers and commercial real-estate companies. The strangest example came when an AI news release from a Florida firm called Algorhythm Holdings—which once focused its business on selling karaoke machines—sent transport stocks to their worst day since April’s tariff turmoil.

 

Those wild swings brought a new twist on a rotation into so-called real economy shares that has been under way for months. Since the Nasdaq composite hit its last all-time high in October, market gains have broadened from a narrow group of AI bets to a wider swath of stocks, including blue chips, smaller companies and international equities.

But over the past couple of weeks, that bet on accelerating economic growth started to look more like a rush to safety. “What I see is investors hiding out,” said Jed Ellerbroek, portfolio manager at Argent Capital Management.

The hunt for havens cuts across typical categorizations of “risk-on” versus “risk-off” equities, Ritholtz’s Brown said, and has even divided players within industries. He gave the example of Delta Air Lines, whose shares are up 5.4% in February. Compare that with travel deal-hunting site Expedia, whose stock has tumbled 23% over that period.

 

The difference: AI might be able to find you the best price for a flight. But you’ll still need to get on a plane. 

Not everyone is convinced the HALO hype will stick around. Tech shares regained some ground this past week, with the Nasdaq besting the Dow industrials. Stocks got a lift on Friday after the news that the U.S. Supreme Court had struck down President Trump’s global tariffs. 

And the selling action this month has seemed rash at times, said Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management. “A lot of what’s gone on has felt very whiplash-y,” she said. “We don’t have any real idea who the [AI] losers are going to be.” 

Investors are still piling into some AI plays. Shares of data-storage providers Seagate and Western Digital are among the best-performing in the S&P 500 this year. Individual investors are still all in on the biggest tech names: large-cap shares including Microsoft, Palantir and Amazon account for most of their purchases year to date, according to analysts at JPMorgan. 

Next week brings one of the markets most crucial litmus tests of the artificial-intelligence trade, when chip maker Nvidia reports earnings on Wednesday. Also due are quarterly financials from software companies Salesforce and Workday, as well as home-improvement retailer Home Depot.

 

The choppy trading of the past few weeks—paired with lingering concerns that big tech companies are overspending to get ahead in a technological arms race—marks a kind of evolution for the AI investing frenzy, Ellerbroek said. After years of throwing money at any potential winners, Wall Street has grown much more discerning. 

“I do think we’re in a new chapter, and I think that chapter is going to be defined by companies proving it,” Ellerbroek said. “Hype isn’t cutting it anymore.