Investors have flocked to supermarkets, energy companies and manufacturers this year in an anything-but-tech trade that has fueled a violent downward spiral in the US stock market.

US equity funds are focused on sectors outside of tech sector attracted $62bn in outflows in the past five weeks, surpassing the $50bn added by investors to such funds throughout 2025, Deutsche Bank data showed.

The outflows fueled a raft of previously out-of-favor sectors, while many of last year’s best-performing companies struggled as Wall Street’s AI boom stalled and investors worried about the technology’s impact on the software industry.

The shakeout accelerated last week as private capital groups were swept up in a sharp selloff in software stocks triggered by the release of new coding tools by AI start-ups Anthropic.

There is “a big rotation to what we call AI-immune sectors like utilities, food, mining, construction, telecoms”, said Andrew Lapthorne, quantitative strategist at Société Générale.

Eight of the S&P 500’s 11 sectors have risen since the start of January — with information technology, financials and consumer discretionary stocks falling only — while the small-cap Russell 2000 is up 6 percent.

Over the past three months, the Russell 2000 has outperformed the tech-focused Nasdaq 100 by more than 10 percent.

But despite the broad gains, the S&P as a whole has struggled to improve since tech stocks peaked in late October, underscoring the Wall Street benchmark’s all-important tech sector.

“Broadening market performance over the past few months has come at a cost: not-so-good gains at the index level,” said Kevin Gordon, head of macro at Charles Schwab.

Tractor company Deere and construction groups TopBuild and Comfort Systems USA have all gained more than 20 percent since the start of January and are trading at record highs. Software groups Salesforce, AppLovin and FactSet are among the 10 worst-performing S&P 500 stocks this year.

Energy and materials stocks soared, while Bank of America analysts noted that consumer staples had their best start to the year in more than a quarter of a century. Walmart’s market value last week topped $1tn, putting the US’s largest retail chain in an exclusive club dominated by tech groups.

The members of Big Tech’s Magnificent Seven fail to keep up. Amazon, Google and Microsoft all fell sharply last week after revealing plans to spend hundreds of billions of dollars on AI infrastructure this year.

“There will definitely be more scrutiny (of Big Tech),” said Seema Shah, chief global strategist at Principal Asset Management. “Valuations are inflated. So now people want to see a return on investment.”

Analysts say the rotation begins in the last quarter of 2025 amid signs of an expansion in earnings growth beyond megacap tech. That momentum carried into fourth-quarter results season: the median growth rate for S&P 500 companies reported so far was nearly 10 percent, a four-year high, Deutsche Bank said.

The economy is projected to grow at a 4.2 percent annualized rate in the fourth quarter, according to the Atlanta Federal Reserve. That fast pace of growth has boosted the appeal of stocks in the transportation, metals and mining sectors that typically do well during economic expansion, according to Max Kettner, chief multi-asset strategist at HSBC.

Expectations of lower interest rates this year have also added to investors’ optimism about the trajectory of the US economy.

US software stocks bear the brunt of the rotation that continues within the market. A recent report from the prime brokerage division of Goldman Sachs showed hedge funds spent January selling off the sector while shifting cyclicals and industrials.

“The software house is on fire and the fire is starting to jump the block,” said Jon Zauderer, a tech and software specialist at Citigroup.

As fears of the impact of Anthropic’s latest tools grew, “people thought, OK, I have to remove the risk”, added Zauderer. “Gaming companies, (electronic design automation) groups, IT services, everything is taken.”

Concerns about how AI could disrupt software businesses spanning the publishing, legal and financial sectors could translate into flows for consumer staples, according to Jeff Blazek, co-chief investment officer and head of multi-asset strategies at Neuberger Berman.

“Capital that wants safe, stable income needs a new home,” he said. “If it’s selling things like software, maybe it’s going somewhere like staples, like a parking lot, as a more defensive exposure.”

AI wobbles helped European and Asian markets extend last year’s outperformance relative to the US. The Stoxx Europe 600 is up nearly 5 percent this year, compared with less than 2 percent for the S&P, while many emerging markets have made bigger gains.

“We’ve seen a huge expansion from the US to the rest of the world, and from AI and tech to almost everything else,” said a senior equities trader at a European bank.