Rotation in the stock market continues as investors remain concerned about the size and nested nature of deals in the AI space. Bears have pointed to growing off-balance sheet liabilities at the hyperscalers, which, according to some estimates, could reach as high as $2.0 trillion, albeit over a multidecade time frame, and the unusual financing arrangements that are being deployed at companies like Nvidia NVDA.
In the adjacent semiconductor space, equity investors are wondering what advances in China and the recent listing of memory maker CMXT in Beijing will mean in the longer term for memory supply chains.
The AI trade is not dead, far from it, but it is being re-evaluated, particularly from a risk standpoint.
Source: FT
Against that background, money is looking for and finding alternative homes, and we can see that in the table below, which tracks the performance of the S&P 500 sectors over the short term (3 months and under).
Materials added +5.20% in the last week, and it was by far the strongest sector over this metric.
We can also see that Healthcare and Financials have enjoyed double-digit gains over the last three months, doubling or even tripling the performance of the IT sector.
Source: Barchart.com
The Materials sector (many of whose products are a key part of data centre construction) is outperforming the MAG 7 (pink), Data Centre ( black) and Semiconductor (orange) ETFs. $SRMA, the Materials sector index, is drawn in green.
Source: Barchart.com
Within Materials, stocks exposed to precious metals have also perked up.
Gold miners such as GFI are testing higher after a 5-month downtrend.
Source: Barchart.com
There are also signs of life in Silver and Silver miners, too.
Look to the far right of the table below, at the column 1M vs IDX, which shows us a snapshot of the relative performance of the silver miners compared to the S&P 500.
For example, PAAS Pan American Silver has beaten the index by +16.44% over the last month, and I note that every stock in this list has posted a double-digit 5-day percentage gain.
Source: Barchart.com
Recent weakness in the Dollar Index has boosted both gold and silver miners, and to be honest, with the right catalyst, a pullback to 97.92 in DXY doesn't look out of the question to me.
Source: Barchart.com
We can't write off the sectors that have been leading the market just yet, if for no other reason than the fact that they continue to lead earnings and associated data. For instance, look at this chart from JPM AM, which looks at margin expansion (in this instance, margin is the difference between the cost of making something and the price you sell it for), and the semiconductors (driven by demand from the hyperscalers) have what’s known as pricing power and have been exercising it.
Source: JPM AM Research
And what about this quote from FactSet:
“The Information Technology sector is reporting the second-highest (year-over-year) revenue growth rate of all eleven sectors at 35.9%. At the industry level, all 6 industries in the (IT) sector are reporting year-over-year revenue growth: Semiconductors & Semiconductor Equipment (reported) 77% growth”
Source: FactSet Earnings Insight 7/08/2026
Despite being top of the earnings tree, Semiconductors have had a tough few weeks.
Here we see the SOXX ETF in black plotted against IGV, the iShares Software sector ETFs in blue and since 24th July it's IGV that has been making gains.
Software, of course, had been under intense pressure itself since November as traders bet that AI would eat the software as a service, or SaaS providers' lunch.
That’s still a possibility, of course, but I think a more nuanced view is now emerging, one in which software and AI complement each other rather than compete head-on.
Source: Barchart.com
That’s still a possibility, of course, but I think a more nuanced view is now emerging, one in which software and AI complement each other rather than compete head-on. As far as the markets are concerned, right now, sectors are competing with each other for traders' attention, keeping up with these narratives, swings in sentiment, and the last cohort of earnings announcements should keep us occupied over the remainder of August.
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