Investors seeking shelter from the recent tech sell-off devastating Wall Street should consider shifting their focus to “old economy” sectors, according to analysts at Piper Sandler. The firm released recommendations this week as markets experienced a dramatic tech sector downturn that began with software stocks and eventually spread to major players including Microsoft.
The tech sell-off was triggered by an agentic AI update from Anthropic that sparked widespread fears about AI replacement across the software industry. This bearish sentiment has infected the broader technology sector, prompting a risk-off shift among investors over recent trading sessions.
Old Economy Sectors Emerge as Safe Havens
Piper Sandler analysts view the tech sell-off as part of a healthy market rotation toward cyclical and value stocks in traditional industries. According to the firm, the bull market remains intact despite the turmoil affecting popular technology and growth investments.
“The bull market is intact; however, it’s not being led by the popular Tech and Growth favorites of investors. Instead, new momentum and leadership are emerging in cyclical and value sectors—Energy, Industrials, Materials, Staples, and Banks,” the analysts stated.
Technology Sector Performance Lags Behind
The S&P 500 information technology sector has emerged as the worst performer in the index during 2026, declining more than 6% year to date. Software stocks have been particularly hard hit, with the iShares Expanded Tech-Software Sector ETF plummeting 17% over the past week alone.
Meanwhile, traditional sectors recommended by Piper Sandler have demonstrated stronger performance. These old economy plays have benefited from investors fleeing technology stocks perceived as vulnerable to AI disruption.
Multiple Factors Drive Market Rotation
Goldman Sachs analysts echoed similar themes in their own research this week, examining which industries face the least exposure to AI automation risks. After years of prioritizing stocks with AI exposure potential, concerns about technological disruption have pushed investors back toward real economy industries, according to Goldman.
The Goldman team analyzed industry exposure to AI automation relative to labor costs and sales to identify insulated sectors. Their findings aligned with several of Piper Sandler’s recommendations, specifically highlighting energy, industrials, and consumer staples as relatively protected spaces.
Economic Recovery Supports Cyclical Rotation
Additionally, Goldman analysts noted that the tech sell-off has accelerated an existing trend toward cyclical stocks. “The investor search for insulation from AI disruption risk has accelerated the ongoing cyclical rally,” they wrote in their analysis.
However, the rotation extends beyond simple AI risk avoidance. BNY Investment researchers attribute the shift partially to cyclical recovery in the US economy, suggesting fundamental economic factors are supporting old economy sectors.
“The prevailing narrative in US equity markets is one of market broadening and leadership rotation, consistent with our view of a cyclical recovery in the US economy,” BNY analysts explained. In contrast to those viewing the software crash as overblown—including Nvidia CEO Jensen Huang—many strategists frame the movement as a natural and potentially beneficial market rotation.
Market observers will continue monitoring whether this rotation toward old economy sectors persists or if technology stocks regain their leadership position. The duration and severity of AI-related concerns remain uncertain as investors reassess valuations across the market.
