Observed Signal · Oct 26, 2026 · Market Analysis · Source: CNBC Investing · Impact: 2/5 · Sentiment: Neutral
S&P 500 ex-AI index catches up with benchmark after tech selloff
A Goldman Sachs index tracking the S&P 500 excluding 'AI enablers' has matched the traditional index's performance, both up around 12% this year. The ex-AI index briefly overtook the benchmark as investors rotated away from AI-linked stocks following a sharp selloff. Tech and AI companies now make up about 45% of the S&P 500, but the sector has fallen 7% this month. Investors are shifting to defensive sectors like consumer staples, health care, and utilities. Analysts recommend non-AI stocks for diversification, with Oppenheimer favoring commercial services and insurance. Companies like Berkshire Hathaway and Eli Lilly are noted as potential beneficiaries of the rotation.
The article discusses market rotation away from AI stocks, relevant to ad tech as many digital advertising companies are AI-related, but it is primarily a financial analysis piece without direct ad tech implications.
Track Goldman Sachs Signals & Market Shifts in Real-Time
Polaris7 autonomous intelligence agents track regulatory filings, primary sources, executive changes, and deal flow 24/7. Create your Polaris7 workspace to monitor these entities.
Key Takeaways & Evidence Grounding
- A Goldman Sachs ex-AI S&P 500 index is up 12.4% through Oct. 22, matching the S&P 500's 12% gain.
- Tech and AI-related companies make up about 45% of the S&P 500.
- The S&P 500 tech sector is down about 7% this month.
- Oppenheimer upgraded commercial services and insurance to overweight.
- Berkshire Hathaway's Class B shares are up 8% this month.
Connected Companies & Entities
7 Entities mapped“Goldman launched an ex-AI S&P 500 index and it is now neck-and-neck with the traditional index.”
“Berkshire Hathaway is capitalizing on the rotation out of tech, with Class B shares up 8% this month.”
“Healthcare giant Eli Lilly is one idea, up 22% on weight-loss drugs.”
“Investors have soured on debt and equity issued by companies like CoreWeave and Oracle.”
“Investors have soured on debt and equity issued by companies like CoreWeave and Oracle.”
“Barclays recently upgraded the cruise operator to overweight with a $102 target.”
“Oppenheimer recommends Republic Services, Cintas, Verisk Analytics, Broadridge Financial Solutions, MetLife and Arthur J. Gallagher.”
Ontology Mapping & Concepts
Related Market Signals & Shifts
Recent verified developments and strategic activity across this market segment.
AI Bull Market Needs Tech Recovery to Advance
Market strategist Mike Santoli analyzes the recent market rotation from AI and semiconductor stocks into defensive quality names like Walmart, Berkshire Hathaway, and Eli Lilly, which have added $550 billion in market value in the past month. The S&P 500 remains stagnant, while the Nasdaq-100 has fallen nearly 11% from its record high, approaching its 200-day moving average. JPMorgan's Jason Hunter advises defensive positioning until clear bottoming signs emerge. Santoli argues that the bull market driven by AI must see tech recover for the advance to continue. He notes that AI-related stocks still constitute near 45% of the S&P 500, and past chokepoints like GPU scarcity, cloud capacity, and memory shortages have been resolved, but now the constraint is capital, raising the cost of capital for mega-caps. Despite negative sentiment and oversold conditions, valuation risks have decreased, with forward P/E down to 18.5 from 23 a year ago.
Capital Economics: Defensive Sectors Best AI Trade Shelter
Capital Economics, which correctly predicted the AI rally slowdown, advises investors to seek refuge in defensive sectors like real estate and consumer staples in case the AI trade falters. The firm forecasts a potential 16% decline in the S&P 500 to 6,500 by the end of 2027 if the AI bubble bursts. However, a final rally led by tech stocks is expected this year. Capital Economics highlights that Treasury yields typically fall when the semiconductor index drops significantly, benefiting real estate. Consumer staples are deemed an even better defensive play, having performed well after the tech peak in 2000. The analysis comes amid concerns over megacap tech companies' heavy capital expenditures on AI infrastructure without adequate returns, as evidenced by negative free cash flow reported by Alphabet and Meta.
Goldman recommends defensive stocks amid AI bull concerns
Goldman Sachs advises investors concerned about a potential slowdown in the AI trade to consider defensive stocks in health care and consumer staples. The bank notes that AI capital spending currently contributes about half of S&P 500 earnings growth, but expects this to diminish as spending growth slows. Rising energy prices and interest rates are clouding the economic outlook, with higher financing costs raising doubts about the durability of the AI infrastructure buildout. Goldman's screen highlights companies with high free cash flow yields and recent underperformance, such as Tyson Foods (11% FCF yield, down 17% over six months) and CVS Health (9% FCF yield, down 15% in three months). Despite these defensive recommendations, Goldman's base case still expects continued earnings growth, with a potential catch-up trade in consumer-facing stocks fueled by weaker energy prices and falling interest rates anticipated in 2027.
Receive all future signals for Goldman Sachs & competitors in your briefing
Never miss material M&A deals, leadership changes, account wins, or product rollouts. Polaris7 monitors 20,000+ primary sources 24/7, delivering verified telemetry directly into your executive briefing.