Tech’s 37% S&P 500 Weight Raises Risk From AI Stock Rotation

Technology’s 37% share of the S&P 500’s market capitalization makes a selloff in AI-linked stocks more consequential for U.S. indexes as investors rotate into other sectors.

The iShares Semiconductor ETF (SOXX) has fallen more than 23% over the past month as investors worried that AI-linked companies were borrowing too much to fund capital spending. Intel and Cerebras Systems shares each fell nearly 50%, making them the worst-performing SOXX holdings.

The S&P 500 technology sector accounts for 37% of the benchmark’s total market capitalization. A rotation out of one industry and into another would normally support the broader market, but the sector’s size means a technology selloff can offset advances in areas with less AI exposure.

The Dow Jones Industrial Average has far less technology exposure than either the S&P 500 or Nasdaq-100, and it rose 4.1% over the past month. The equal-weighted S&P 500 advanced more than 5% over the same period. Those gains, alongside the semiconductor decline, show a split in performance across U.S. stocks.

Thursday, Nov. 5, brought another version of that split in futures trading. Dow futures gained 300 points and were positioned to add to the index’s 1,500-point advance from Wednesday. Nasdaq-100 futures dropped 1% as CoreWeave and Nebius shares declined, while Qualcomm shares fell 12% after the chipmaker issued weaker-than-expected guidance.

Investors have worried that AI-linked companies may be borrowing too heavily to finance capital spending. Barclays strategist Venu Krishna described the shift toward stocks with less AI exposure as a “rotation into areas with limited AI exposure,” linking the move to questions about the durability of AI infrastructure investment.

SOXX also closed below its 200-day moving average for four consecutive sessions. Jonathan Krinsky, BTIG’s chief market technician, said there were opportunities on both sides of the market but cautioned that “broad market risk has not been eliminated.” TokenPost previously covered the tech selloff’s effect on the fortunes of AI-linked executives and founders.