As technology stocks continue to fall, a new group of market leaders has emerged: companies whose businesses possess attributes that artificial intelligence cannot replicate.

Driven by declines in software stocks, the S&P 500 fell 0.9% this week. Concerns that AI will disrupt the business models of software companies intensified after startup Ansopric launched a new generation of AI tools. Meanwhile, shares of homebuilders, transportation companies, and heavy machinery manufacturers performed strongly. Consumer staples firms, already viewed as safe-haven assets during economic downturns, rose 5.2% this week and are on track for their best weekly performance since 2022.

On Friday, as the broader market recouped some losses, all of these leading sectors saw their shares rise again. The Dow Jones Industrial Average, composed mainly of manufacturing companies and other traditional economic giants, outperformed both the S&P 500 and the tech-heavy Nasdaq 100 Index.

This trend marks a sharp reversal from the core logic that drove the US stock market's three-year bull run. While technology stocks have long been the dominant market leaders due to expectations that AI would reshape the economy, investors now fear that many tech companies could be left behind in this transformation. In contrast, sectors tied to the physical economy have become significantly more attractive.

"Investors are shifting towards 'AI-resistant' sectors, businesses that are grounded in physical industries and real-world scenarios," wrote Michael O'Rourke, chief market strategist at Jones Trading, in a research note this week. "These sectors represent solid safe-haven choices, with previously unexciting investments now possessing unprecedented appeal."

Homebuilders and construction product manufacturers are cited as quintessential "AI-resistant" investments. Citigroup analyst Anthony Pettinari noted that their core activities—manufacturing, logistics, distribution, and assembly/construction—are not areas easily replaceable by AI. Although the analyst described the performance of related companies as "modest," an index tracking homebuilders and residential construction has climbed 13% in 2026, starkly contrasting with the S&P 500's 0.5% gain.

"Ultimately, building a house still requires human labor," said Jay McCanless, an analyst at Citizens Bank who focuses on the homebuilder sector. He also mentioned that the sector is benefiting from the spring homebuying season, adding, "If the rotation out of tech stocks can further boost builder shares, that would be an added bonus."

Furthermore, machinery manufacturers and transportation companies are poised for their best weekly performance since May of last year. Bolstered by falling interest rates and resilient US economic data, investors have been shifting funds for weeks into companies like Deere & Co. and FedEx.

Ross Mayfield, an investment strategist at Baird, pointed out that positive manufacturing data released on Monday, followed by investors pulling money from the tech sector to seek other opportunities, accelerated the rally in industrial stocks.

**Return to Physical Essentials**

O'Rourke of Jones Trading also identified consumer staples and chemical companies as part of the "AI-resistant" cohort. The consumer staples sector, which includes companies like Dollar General and Dollar Tree, was the best-performing group in the S&P 500 this week.

Chemical stocks, which fell sharply in 2025 due to demand weakness and regulatory policies, are now rebounding. Investors anticipate improved earnings for the chemical industry in 2026, alongside expansion in its core end markets of manufacturing and residential construction. This outlook has driven shares of Dow Inc. (which produces industrial, packaging, and materials chemicals) and LyondellBasell Industries (which makes polymers, chemicals, and fuels) higher.

"With demand recovering, investors are optimistic about basic chemical companies seeing an earnings rebound and improved prospects this year," said Seth Goldstein, an analyst at Morningstar. "At the same time, in an environment of persistent outflows from high-growth sectors like tech, specialty chemical firms are seen as more defensive investment options."

A combination of factors created this week's divergent market performance: indexes for trucking, machinery, and consumer staples all hit record highs. Meanwhile, by Thursday, the Nasdaq 100 had fallen 6% from its late-October peak last year. Although the tech index rose 1.2% in early trading Friday, it was still down for the week.

"If investors choose to take profits or sell software stocks due to the prospects of AI development, they have plenty of high-quality stock alternatives to choose from," said Baird's Mayfield.