From AI Darlings To Dow Dinosaurs: Investors Flee Software For Old-Economy Stocks

Software and other AI-exposed stocks have stumbled out of the gate this year, with the sell-off picking up pace in February as fresh fears emerged that artificial intelligence could disrupt, rather than fuel, demand.

• What’s pushing IGV stock higher?

Concerns intensified after new announcements from Anthropic’s Claude Cowork and Google’s Genie 3 reignited questions about who really wins in the next phase of AI.

Yet, this hasn’t triggered a full-blown market panic. Instead, investors are quietly moving on — and the escape routes are becoming easier to spot.

Goldman Sachs equity strategist Ben Snider says capital is rotating decisively toward sectors viewed as insulated from AI disruption, not those most closely tied to the theme.

That distinction is crucial — and it marks a clear break from last year’s market playbook, when exposure to AI was seen almost universally as a tailwind.

AI-Insulated Industries Take Off

Cyclical and consumer-linked industries have extended recent rallies as software stocks sold off.

Strikingly, as software stocks suffered one of their worst weeks since the 2022 rate-hike panic, the Dow Jones Industrial Average — a bellwether of industrials, transport and old-economy names — rallied toward all-time highs.

According to Goldman Sachs, the market is rotating toward one defining characteristic: insulation from AI-driven productivity risk.

In a note shared Friday, the investment bank examined which industries offer the greatest “insulation” from AI disruption — measured by their weakest correlation with iShares Tech-Expanded Software Sector ETF (NYSE:IGV) — highlighting potential escape routes from the ongoing software sell-off.

These groups share a key characteristic: their revenues are tied to physical assets, real-world demand and cyclical activity, not software pricing power or data monetization.

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