The market's biggest concern at present appears to be artificial intelligence investment spending, which some investors argue has risen to levels that could strain corporate balance sheets and create hidden risks in bond and credit markets.

The recent selloff in stocks, which has pared around 2% from the S&P 500 over the past 10 days and dragged the Nasdaq into a 3% decline for the year, is also tied to a rush by investors to dump stocks seen as vulnerable to AI disruption in favor of companies viewed as beneficiaries -- or immune to its advance.

But what if that new focus, which has slashed the value of software stocks and powered massive year-to-date gains in energy, materials and other so-called "real economy" sectors, actually helps justify the titanic levels of capital spending now causing such investor unease?

Jean Boivin, who heads BlackRock's Investment Institute, thinks that may be the case.

"A few months ago, the market debated whether AI was real," he and his team said in a note published Tuesday "Today, it's seen as an active threat to business models."

"The market has been laser-focused on identifying companies exposed to AI disruption -- and sorting out which ones it thinks will be able to evolve and adapt," he added. "We believe the hunt to sort the winners and losers reinforces AI's massive buildout -- and the borrowing spree to finance it."

AI-related spending remains uppermost in investors' minds, however, with a record number of respondents in Bank of America's Fund Manager Survey worried that tech companies have committed too much capital to build out data centers, buy chips, and secure talent.

The so-called Big Four hyperscalers -- Microsoft, Alphabet, Amazon, Meta Platforms -- have committed about $650 billion to data center capital spending this year, a roughly 60% increase from 2025 levels, with billions more likely required to meet expected demand before the end of the decade.

At the same time, those same investors cite fears of an "AI bubble" as the market's biggest risk and are increasingly allocating money to non-U.S. stocks as a hedge.

According to Goldman Sachs estimates, that shift has helped produce the worst start to the year for the S&P 500 relative to the MSCI ACWI -- the benchmark for the world's biggest non-U.S. stocks -- since 1995.

But Boivin argues the market's knee-jerk reaction misses nuances within the broader AI theme.

Software stocks, for example, have suffered steep losses in recent weeks, and the iShares Expanded Tech-Software Sector ETF benchmark remains in the bear market territory for the year and roughly 30% below its late-September peak.

Yet that indiscriminate selling may be masking some hidden value.

"Software companies with proprietary data, mission-critical workflows or strong customer relationships can leverage AI disruption and thrive," Boivin said.

Ken Mahoney, CEO of Mahoney Asset Management, agrees it may take some time before the relative-value opportunities in software -- or other sectors that have been "sucked into AI fears" -- become clear, but he's confident they will ultimately emerge.

"The market has no way of hiding or not showing its hand about which companies may fare best through this over the coming weeks," he said. "There is a large opportunity we think when you have a 'baby with the bathwater' situation."

"There are some certain hot pockets in utilities, energy, home builders, memory, and photonics," he added. "You also can take the contrarian view and look to buy a quality company like Microsoft."

Investors, for now, remain hesitant to catch any particular falling knife. The S&P 500 is down about 1.4% for the month, while the VIX volatility gauge has risen 5%. The Nasdaq, meanwhile, is down nearly 4% for the month and about 6.5% from its late-October peak.

"Sentiment has changed," said Jay Woods, chief market strategist at Freedom Capital Markets. "Six weeks into the new year and with earnings season coming down the homestretch we are experiencing some new and somewhat disturbing trends."

Still, Woods believes the recent leadership shift -- away from AI-heavy megacaps and toward other parts of the market -- could help extend the bull run.

"When studying market cycles and history of leadership this is late cycle bull market activity," he said. "The market will struggle to go higher in this case, but it doesn't mean this bull run is over. You just need to position yourself towards the new leadership and skate where the puck is going."