The U.S. stock market is facing a wave of uncertainty. Technology stocks are falling, concerns about AI valuations are growing, and more than $2 trillion in market value has come under pressure in October.<\/p>\n\n\n\n
But there is another side to the story.<\/p>\n\n\n\n
While technology stocks have struggled, several other sectors have continued to gain. In the week ended October 30, nine of the S&P 500’s eleven sectors finished higher. Healthcare gained 3.1%, utilities rose 2.1%, and materials advanced 2.8%.<\/p>\n\n\n\n
The broader market is also showing signs of strength. The S&P 500 fell 0.6% during the week, but its equal-weighted counterpart gained 0.8%.<\/p>\n\n\n\n
This raises an important question. Is the AI rally coming to an end, or is the market simply shifting its leadership?<\/p>\n\n\n\n
October was a difficult month for technology stocks.<\/p>\n\n\n\n
The Nasdaq-100 fell more than 5.8%, putting over $2 trillion in market value at risk. The sell-off intensified towards the end of the month, as investors questioned whether Big Tech’s growing investments in artificial intelligence would generate adequate returns.<\/p>\n\n\n\n
Companies such as Microsoft, Alphabet, Amazon and Meta are spending billions of dollars on AI infrastructure. Their investments include data centres, advanced chips, networking equipment and cloud computing capacity.<\/p>\n\n\n\n
The opportunity is significant. AI could transform industries, improve productivity and create new revenue streams. However, the scale of investment has raised questions about profitability.<\/p>\n\n\n\n
According to Reuters, Morgan Stanley expects AI infrastructure spending to exceed $1 trillion next year. JPMorgan estimates that global AI investment could reach $900 billion in 2026 and $5.5 trillion by 2030.<\/p>\n\n\n\n
These figures highlight the scale of the current investment cycle.<\/p>\n\n\n\n
However, building AI infrastructure requires substantial upfront capital. Companies must invest in computing capacity, electricity, equipment and data centres before generating returns.<\/p>\n\n\n\n
If demand grows as expected, these investments could support significant earnings growth. But if revenue fails to keep pace with spending, companies could face pressure on margins, cash flows and returns on invested capital.<\/p>\n\n\n\n
This is the concern driving the recent sell-off.<\/p>\n\n\n\n
Investors are not necessarily questioning the future of AI. They are questioning how quickly companies can turn their investments into profits.<\/p>\n\n\n\n
The weakness in technology stocks has coincided with stronger performance across several other sectors.<\/p>\n\n\n\n
Consider the week ended October 16. Technology declined 7.7%, while consumer staples gained 5% and energy rose nearly 4.9%.<\/p>\n\n\n\n
The trend continued during the final week of October.<\/p>\n\n\n\n
Healthcare gained 3.1%, materials advanced 2.8%, and utilities rose 2.1%. Meanwhile, technology and communication services were the only two sectors to finish in negative territory.<\/p>\n\n\n\n
S&P 500 sector performance for October 26 to 30, 2026<\/strong><\/p>\n\n\n\n Source: Sector ETF performance, October 26 to 30, 2026. Returns rounded.<\/em><\/p>\n\n\n\n Nine of the eleven sectors finished higher.<\/p>\n\n\n\n This is important because a broad market sell-off would generally involve weakness across a much wider range of industries.<\/p>\n\n\n\n Instead, the data suggests that market leadership is changing. Investors appear to be reducing exposure to some of the largest technology companies while favouring businesses in other sectors.<\/p>\n\n\n\n This is commonly known as sector rotation.<\/p>\n\n\n\n It occurs when investors shift their exposure between industries based on changing expectations around economic growth, earnings, valuations and interest rates.<\/p>\n\n\n\n However, sector performance alone does not establish that money has directly moved from one industry to another. The important point is that market gains and losses are becoming less concentrated in technology.<\/p>\n\n\n\n One of the clearest indicators of this change is the difference between the traditional S&P 500 and the S&P 500 Equal Weight Index.<\/p>\n\n\n\n The traditional S&P 500 is weighted by market capitalisation. Companies with larger market values have a greater influence on the index.<\/p>\n\n\n\n For example, a company worth $4 trillion has a much greater impact on the index than one worth $100 billion.<\/p>\n\n\n\n This structure has benefited the S&P 500 over recent years, as some of the largest technology companies delivered exceptional returns.<\/p>\n\n\n\n However, it also creates concentration risk. When these companies fall, they can pull down the entire index, even when most other constituents are performing well.<\/p>\n\n\n\n The equal-weighted S&P 500 works differently. It gives every constituent approximately the same weight, regardless of its market value. The index is rebalanced quarterly to maintain equal allocations.<\/p>\n\n\n\n This means smaller companies have a greater influence on its performance than they do in the traditional index.<\/p>\n\n\n\n The difference became particularly clear during the final week of October.<\/p>\n\n\n\n While the traditional index declined, the equal-weighted version gained.<\/p>\n\n\n\n The difference was even more significant over the entire month.<\/p>\n\n\n\n In October, the traditional S&P 500 fell 0.9%, while the equal-weighted index gained approximately 5%.<\/p>\n\n\n\n That is a difference of nearly six percentage points in a single month.<\/p>\n\n\n\n The trend is also visible in their year-to-date performance. As of November 4, the equal-weighted S&P 500 had gained approximately 16% on a total-return basis, compared with approximately 13.4% for the traditional index.<\/p>\n\n\n\n This suggests that the market’s performance is no longer being driven exclusively by its largest companies.<\/p>\n\n\n\n More stocks are contributing to overall market returns.<\/p>\n\n\n\n This divergence is not without historical precedent.<\/p>\n\n\n\n A similar pattern emerged during the dot-com bubble in 2000.<\/p>\n\n\n\n At the time, internet and technology companies attracted enormous investor interest. Expectations of future growth pushed valuations higher, and a relatively small group of companies became increasingly influential in the broader market.<\/p>\n\n\n\n When sentiment changed, these companies came under significant pressure.<\/p>\n\n\n\n According to historical data from ClearBridge Investments, the market-cap-weighted S&P 500 declined approximately 9.1% in 2000. Its equal-weighted counterpart gained approximately 9.6%.<\/p>\n\n\n\n That was a difference of nearly 19 percentage points.<\/p>\n\n\n\n The reason was concentration.<\/p>\n\n\n\n The largest technology companies had a disproportionate influence on the traditional index. Their declining valuations dragged down its performance.<\/p>\n\n\n\n Meanwhile, the equal-weighted index had greater exposure to the other companies in the S&P 500, many of which performed better.<\/p>\n\n\n\n There is an important distinction here. The S&P 500 Equal Weight Index was officially launched in 2003. Its 2000 performance is back-tested historical data, not the return of a live index that investors could have purchased at the time.<\/p>\n\n\n\n Nevertheless, the comparison highlights an important investment principle.<\/p>\n\n\n\n A market dominated by a few large companies can experience significant weakness even when a broader group of stocks performs relatively well.<\/p>\n\n\n\n The current AI investment cycle is different from the dot-com bubble. The comparison should not be treated as a prediction. But it shows why investors should look beyond headline index returns.<\/p>\n\n\n\n The difference between the two indices raises an important question about portfolio diversification.<\/p>\n\n\n\n Many investors assume that owning an S&P 500 ETF provides equal exposure to 500 companies.<\/p>\n\n\n\n It does not.<\/p>\n\n\n\n The largest companies account for a substantial share of the index. As a result, investors can have significant exposure to a relatively small group of businesses without realising it.<\/p>\n\n\n\n This becomes particularly important when investors hold multiple ETFs.<\/p>\n\n\n\n For example, an investor holding both an S&P 500 ETF and a Nasdaq-100 ETF may believe they are diversifying across two different investments.<\/p>\n\n\n\n However, both indices have considerable exposure to several of the same large technology companies.<\/p>\n\n\n\n This creates overlapping exposure.<\/p>\n\n\n\n If these companies experience a sharp correction, both investments could decline together.<\/p>\n\n\n\n The issue is not that market-cap-weighted indices are unsuitable. They provide access to leading companies and have delivered strong long-term returns.<\/p>\n\n\n\n The important point is to understand what drives those returns and how much concentration exists within a portfolio.<\/p>\n\n\n\n Diversification is not simply about owning more stocks or ETFs. It is about spreading exposure across different businesses, industries and sources of risk.<\/p>\n\n\n\n The recent market movement highlights several factors investors should monitor.<\/p>\n\n\n\n 1. AI spending and earnings<\/strong><\/p>\n\n\n\n Technology companies are committing enormous amounts of capital to AI infrastructure. Investors should track whether this spending translates into higher revenues, stronger margins and improved free cash flow.<\/p>\n\n\n\n Capital expenditure alone does not create shareholder value. The returns generated by that expenditure matter.<\/p>\n\n\n\n 2. Earnings beyond Big Tech<\/strong><\/p>\n\n\n\n A broader market rally would be more sustainable if earnings growth extended to companies across multiple sectors.<\/p>\n\n\n\n Healthcare, industrials, financial services and consumer businesses could play a larger role in market performance if their earnings continue to improve.<\/p>\n\n\n\n 3. Interest rates<\/strong><\/p>\n\n\n\n AI infrastructure requires significant capital. Higher borrowing costs can make these projects more expensive and affect their expected returns.<\/p>\n\n\n\n Changes in interest-rate expectations can therefore influence both technology valuations and the wider equity market.<\/p>\n\n\n\n 4. Market breadth<\/strong><\/p>\n\n\n\n Investors should monitor how many companies are participating in the market’s gains.<\/p>\n\n\n\n The equal-weighted S&P 500, advance-decline ratios and the percentage of stocks trading above their moving averages can provide useful insights.<\/p>\n\n\n\n If more companies participate in the rally, it would indicate that market performance is becoming less dependent on a handful of large stocks.<\/p>\n\n\n\n 5. Portfolio concentration<\/strong><\/p>\n\n\n\n Investors should examine how much of their portfolio is exposed to the largest companies.<\/p>\n\n\n\n Holding multiple ETFs does not automatically mean holding a diversified portfolio. Understanding overlapping investments is an important part of managing risk.<\/p>\n\n\n\n The recent decline in technology stocks has raised legitimate questions about AI valuations, capital expenditure and the ability of companies to generate adequate returns.<\/p>\n\n\n\n These risks should not be ignored.<\/p>\n\n\n\n However, the broader market tells a different story. Nine of eleven S&P 500 sectors gained during the final week of October. The equal-weighted index outperformed the traditional S&P 500. Several industries outside technology continued to deliver positive returns.<\/p>\n\n\n\n This does not mean the market is immune to a broader correction. Nor does it mean that every sector is attractively valued.<\/p>\n\n\n\n It does suggest that the recent weakness is not being experienced equally across the market.<\/p>\n\n\n\n For investors, the more important question may not be whether the AI rally is ending. It may be whether their portfolios are prepared for a market where leadership is no longer concentrated in a handful of mega-cap companies.<\/p>\n\n\n\n The S&P 500 can tell one story. The equal-weighted index can tell another.<\/p>\n\n\n\n Understanding both can help investors make better sense of market movements and assess the risks within their portfolios.<\/p>\n\n\n\nSector<\/strong><\/td> Weekly return<\/strong><\/td><\/tr> Healthcare<\/td> +3.13%<\/td><\/tr> Basic Materials<\/td> +2.81%<\/td><\/tr> Utilities<\/td> +2.09%<\/td><\/tr> Consumer Cyclical<\/td> +2.02%<\/td><\/tr> Industrials<\/td> +1.70%<\/td><\/tr> Real Estate<\/td> +1.41%<\/td><\/tr> Consumer Defensive<\/td> +1.31%<\/td><\/tr> Financial Services<\/td> +1.13%<\/td><\/tr> Energy<\/td> +0.97%<\/td><\/tr> Technology<\/td> -2.01%<\/td><\/tr> Communication Services<\/td> -5.31%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Two Indices, Two Stories<\/strong><\/h2>\n\n\n\n
Index<\/strong><\/td> Weekly return<\/strong><\/td><\/tr> S&P 500<\/td> -0.6%<\/td><\/tr> S&P 500 Equal Weight<\/td> +0.8%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Lessons from 2000<\/strong><\/h2>\n\n\n\n
The Risk of Concentration<\/strong><\/h2>\n\n\n\n
What Investors Should Watch<\/strong><\/h2>\n\n\n\n
Look Beyond the Headlines<\/strong><\/h2>\n\n\n\n