The AI boom's surprising winners aren't even tech companies
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As tech stocks are getting hammered, Wall Street is bidding up real-world, real-goods companies, so-called consumer staples that are likely to stick around even as AI disrupts other industries.
Why it matters: When investors don't understand tech bubbles, they buy soap bubbles instead.
Catch up quick: On Wednesday, the tech-heavy Nasdaq fell over 1.5% while the old-school Dow rallied.
- Consumer staples are having their best performance since 1997, up 12% year-to-date, according to Bank of America.
- The four-week average of money flowing into consumer staples, compared with the sector's market value, has hit a record high.
- Walmart just entered the trillion-dollar company club as investors bid up the stock.
Between the lines: Investors are rotating into stocks that represent the real-world as AI is pummeling sectors like software, which investors worry won't have a use case in a world with Claude Code.
Yes, but: It's hard to tell whether this is a belief in the fundamental use case of, for lack of a better term, basic businesses, or if investors just don't know what to do with their money right now.
- The market is having a DeepSeek-like moment that's pummeling software companies.
- You could buy the dip, but you risk catching a falling knife.
- BofA sees fundamental reasons to like staple stocks, though: an affordability focus from the administration that could boost consumer spending and continued pressure on the dollar that can lift earnings.
Threat level: The most eccentric AI enthusiasts in Silicon Valley see a future where humanity is wiped out, as human workers are no longer needed.
- That would, of course, be bad for consumer staples, and presumably most stocks except maybe a few surviving AI overlord companies.
- But as investors remind themselves during every crisis, stocks would be the least of our worries in that doomsday scenario.
- So buy soap and wet wipes! Humans still need to clean even if AI is taking over several industries.
The bottom line: Investors are hiding out in real-world companies while they wait to see who the winners and losers of the AI revolution are.
