Virtually every day over the past two weeks, a different industry has seen its stocks beaten down by worries that business models will be degraded by the wave of new artificial intelligence technologies.

The losses began last year with anxiety about Big Tech’s massive spending on data centers, and rolled into software stocks. Two weeks ago, the concerns spread to data providers such as Thomson Reuters TRI and commercial real estate names like CBRE Group CBRE. This past week, the rolling selloff hit financial services stocks including Charles Schwab SCHW, alternative strategy fund managers like Blue Owl Capital OWL, and even trucking and logistics companies. The big picture here is a belief that if, as proponents claim, AI will change everything, that necessarily means there will be big disruptions. The bullseye is on service providers.

It’s logical that not every company will be an AI winner. As the euphoria over the technology has matured but its real implementation remains on the horizon, investors are looking to get ahead of any problems.

“I think it’s a protection measure,” says Shannon Saccocia, chief investment officer of wealth at Neuberger Berman. When it comes to the potential threat from AI, “investors are making sure they don’t wake up two, three, four quarters from now and look at a business and say, ‘Well, obviously I should have known.’” She says the perspective is ”If AI is going to be this transformative and disruptive, let me look at any area of services that could potentially be meaningfully more efficient and delivered more cheaply than by these firms.”

But Saccocia says that a lot of the companies under scrutiny have multifaceted business models and “are connected to a core competitive advantage that doesn’t necessarily go away overnight.”

In addition, if anything, the AI integration is accelerating. “I do think it’s a bit overblown in certain areas of services, but I understand the concern from investors and not wanting to be left with a business with one or two meaningful lines that are disrupted and then have to kick yourself because you should have seen it coming,” she says.

The downside of concentration

Another big trend in the markets has been the investor rotation out of AI-focused tech stocks into a broader range of sectors and industries that had been laggard. More evidence of the trend can be seen in the comparison between cap-weighted and equal-weighted indexes. Equal-weighted indexes have the same weightings in each stock, no matter how big the companies are.

In recent years, with market returns dominated by the largest stocks, such as Nvidia NVDA, equal-weighted indexes have lagged far behind cap-weighted ones. Morningstar Indexes strategist Dan Lefkovitz notes that the Morningstar US Target Market Exposure Equal Weighted Index has not beaten the market-cap-weighted Morningstar US Target Market Exposure Index in any calendar year since 2016.

But over the last few months, the tide has shifted. For example, since the beginning of October, the Target Market Exposure Equal Weighted Index is some 4.3 percentage points ahead of the Target Market Exposure Index.

Big-box retail earnings ahead

As earnings season rolls on, the focus will begin shifting to the country’s biggest retailers, with Walmart WMT reporting before the opening bell on Thursday. Home Depot HD and Lowes LOW will post results next week. We checked in with Morningstar senior equity analyst Jaime Katz for the key questions consider as retailers report.

  • How has consumer behavior changed in recent months? Are consumers more hesitant? Is the low-end consumer stabilizing?
  • How are firms able to absorb tariff costs? As we lap a full year of tariffs, will mitigation efforts start to surface to protect profitability?
  • How competitive have different industries become? How much will have to be invested incrementally to keep brand relevance elevated, given rising competition for share of wallet?

What will Q4 GDP show?

Friday will bring the first reading on fourth-quarter 2025 GDP. Despite a significant slowing in hiring late in the year, most signs showed the US economy was in solid shape, even as December retail sales were soft.

The Federal Reserve Bank of Atlanta’s widely watched GDPNow forecast website shows GDP coming in at a fast 3.7% growth rate for the fourth quarter. But Morningstar senior US economist Preston Caldwell thinks that overstates things: “The volatile net exports and inventories categories comprise 1.4 percentage points of that. So the headline number is likely to exaggerate the scale of growth, although 2.3% growth in final domestic demand (GDP ex-net exports, inventories) is still a solid figure.”

In addition, Caldwell expects the GDPNow forecast to come down before the official data is released on Friday, thanks to fresh info on durable goods orders, residential construction, and international trade. Meanwhile, FactSet shows a consensus forecast of a 1.8% growth rate.

Overall, Caldwell says the picture for the US economy is one of a moderating growth path. He expects that when the final 2025 GDP data is released, the economy will have posted an annual average growth rate of around 2.2%, down from 2.8% in 2024. “We expect growth to average 2.1% over 2026-27, so similar to 2025,” he says. “The slightly weaker growth is due to slower population growth and tariffs on the supply side, as well as the drag on aggregate demand from continued high interest rates, with AI being a major offsetting factor helping to prop up economic growth. “

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