The tech sector had a rough week, but resilience in other areas of the market show a broad rotation is underway amid growing fatigue in some hot investment themes.
Beyond tech, other parts of the market held up in the week, signaling investors are moving into other areas. Craig Johnson, Piper Sandler’s chief market technician, described the recent moves as a “mega rotation.”
“The market is undergoing a ‘mega rotation,’ with capital aggressively shifting from lagging mega-cap tech into cyclical and value sectors,” the analyst said.
Rotation is the name of the game
The ongoing AI-induced memory shortage has contributed to the recent market moves, but experts flagged rotation as the larger theme hitting equities.
“Micron’s (MU) blowout earnings provided a temporary spark, but the broader tech sector’s inability to hold gains suggests that confirmation of breadth improvement now matters more than recent momentum in a few,” Johnson said.
Rob Haworth, US Bank Asset Management senior investment strategy director, told Business Insider that the rotation is a critical narrative for investors to watch.
“Rotation remains a key theme in this equity market and that is evident,” he said.
David Morrison, senior market analyst at Trade Nation, called out that the Dow Jones Industrial Average has been resilient relative to the S&P 500 and the Nasdaq Composite, rising on Thursday to hit intraday records while the other two indexes struggled.
Morrison said the moves could be a positive sign that “investors are still keen to be fully invested in equities but are rotating out of overheated semiconductor stocks into some overlooked sectors offering better value.”
Mag 7 stumble
The Magnificent Seven—Nvidia, Amazon, Microsoft, Meta, Alphabet, Apple, and Tesla—were some of the weakest performers in recent trading sessions.
Microsoft and Apple stocks dropped on price hikes for some devices driven by higher memory costs. Investors weighed the reality of the AI-driven chip shortage that’s been fueling massive gains for Micron, Sandisk, and other memory chip makers.
“This key commodity for hyperscalers and technology hardware companies is weighing on these stocks,” Haworth said.
“This indicates still solid investor sentiment despite the challenge of higher costs for some of the largest technology companies” he told Business Insider.
Beyond the price hikes, the Mag 7’s moves represent a larger market rotation out of mega tech into other sectors.
Healthcare gains while tech lags
Tech has been the best performing sector year to date, but its weakness lately has been to the benefit of other sector laggards.
“Lower energy costs and lower long-term interest rates are lifting other segments of the market, including small companies, health care and industrials,” Haworth told BI.
Equal weight S&P 500 outperforms
The equal weight S&P 500 have outperformed the benchmark index.
The equal weight index has gained more than 11% since the start of 2026, compared to the more than 7% rise the S&P 500 had said.
Piper Sandler noted that the equal weight index’s outperformance signals that investors are rotating into value and defensives stocks.
Leave a comment