Big rotation in the US stock sector: AI technology stocks are declining, leading the way in financial consumption

The Zhitong Finance App learned that the US stock market showed significant differentiation on Monday: the strongest individual stocks since this year were sold off, while other sectors remained resilient, and the characteristics of sector rotation became more obvious.

According to Yahoo Finance calculations, as of Monday afternoon trading, the top 10% stocks in the S&P 500 index fell by an average of about 1.6% this year, making it the worst performing sector of the day. The decline was more concentrated at the head — 19 of the top 20 individual stocks that rose in 2026 fell, with an average decline of 2.7%.

Take SNDK.US (SNDK.US) as an example. The stock has accumulated a cumulative increase of more than 500% this year, but fell by more than 7% in a single day on Monday. The stock prices of Micron Technology (MU.US) and Western Digital (WDC.US) doubled during the year, but both fell more than 5% on Monday.

The chip sector showed signs of fatigue. Last week, iShares Semiconductor ETF (SOXX) experienced a sharp sell-off after rebounding to key technical resistance levels. In early trading on Monday, the ETF fell to a three-week low before finding buying support near the $500 integer mark. Software stocks are also under pressure.

But on the other side of the market, it's a completely different picture.

“It's a massive rotation.” Mark Newton, head of technology strategy at Fundstrat, said on Monday. He pointed out that since this year, leading market forces have successively experienced the energy and technology sectors, and with the successive pullbacks in different segments within technology, sectors such as finance, industry, and healthcare have relapsed into the market.

The trend of sector rotation is becoming more and more obvious. On Monday, the technology (XLK) sector performed the worst in the S&P 500's major industry sectors, while essential consumption (XLP), finance (XLF), and communications services (XLC) sectors all rose 1%. Among them, the financial sector is approaching the highest point in intraday history.

This rotating trend has continued for several months. As early as the chip sector entered a bear market, the healthcare sector had already begun to break through the upward trend; less than two weeks ago, some of the riskiest deals in the market still led the market. Today, these early lead forces are waning, but the sell-off has not engulfed the entire market. In early trading on Monday, despite a slight decline in the S&P 500 index, about 56% of the index's constituent stocks still recorded gains.

The US stock bull market has continued for nearly four years, and the current pattern is very different from the overall decline in the past. “We know that sector rotation provides considerable breadth to this market.” Newton added.

Institutional research and judgment: Rotation becomes consensus, and there are differences in the direction of allocation

As for the current market rotation, mainstream Wall Street institutions generally agree with its sustainability, but there are different opinions on the direction of allocation.

J.P. Morgan Chase released a research report on Monday saying that it remains optimistic about the stock market for the rest of the year, but believes that the rise will come from sector rotation rather than a sharp rise in the general upward trend. Strategist Fabio Bassi expects the market to slowly rise, and the main line of the market is sector rotation.

In terms of specific allocation direction, J.P. Morgan is optimistic about high-quality growth stocks and hyperscale cloud vendors. At the same time, it believes that after recent valuations and repricing, the semiconductor sector is also attractive. Furthermore, J.P. Morgan also explained the steeper yield on US bonds, believing that this reflects increased capital demand and investment opportunities rather than market concerns about policy mistakes.

Goldman Sachs's view is more cautious. Veteran trader Natasha Tiwana warned that the momentum structure of the AI theme has fundamentally changed — in momentum factors, the semiconductor and AI composite sector is shifting from bulls to bears, and the software sector has taken over as the greatest weight of short-term momentum. Goldman Sachs pointed out that the number of times the momentum factor experienced a single-day decline of more than 5% in 2026 has exceeded the sum of the past five years, and the market is being forced to seek a wider range of diversified configurations outside of AI narratives.

In terms of allocation proposals, Goldman Sachs suggests investors turn their attention to hard asset exposures such as European and Japanese bank stocks, gold mining companies, and copper stocks. However, Goldman Sachs also made it clear that the AI transaction is not over, but its composition, kinetic energy characteristics, and safety margin are all being rewritten in real time. It is recommended to adopt a more tactical operation method for AI benefiting targets, focusing on the opportunity of a large divergence between price and earnings per share (EPS).

Looking ahead to the future market, the market is paying close attention to two key catalysts: Nvidia (NVDA.US) will release its earnings report on August 26. This “quarterly test” will test the success of the AI narrative; Federal Reserve Chairman Walsh delivered his first keynote speech in Jackson Hole on August 28, or give the latest guidance on interest rate prospects. The two major shows will be staged one after another, and the direction of US stocks will set a key tone.