Investors are rotating out of high-growth, volatile tech and AI-focused stocks and moving into cheaper, smaller, and more stable companies as risk aversion increases.

Small-cap and industrial stocks have outperformed broader indexes, while software and large tech names have lagged.

Concerns over the returns on heavy AI-related capital spending are weighing on major technology companies and investor sentiment.

Market participants are broadening exposure to areas such as industrials, healthcare, dividend-paying stocks, and equal-weighted indexes as they rebalance away from concentrated tech positions.