S&P 500 Splits Into AI and Non-AI Camps as Rotation Whipsaws Investors

U.S. equities are increasingly dividing into two opposing camps — AI-linked stocks and everything else — with the S&P 500 falling more than 1% on Thursday, its worst session since July, even as over 300 index constituents closed higher, according to Dow Jones Market Data. That divergence between the benchmark and its components last occurred in January 2025. The Philadelphia Semiconductor Index (SOX) dropped 6.72% and is more than 26% below its June high, entering bear market territory, while defensive names gained: General Mills (GIS) rose 8% and Campbell's (CPB) added 8.7%. CNN's Fear & Greed Index flashed strong fear, and the 10-year Treasury yield posted its largest one-day decline since the collapse of Silicon Valley Bank. The S&P 500's 10 largest companies now account for roughly 40% of index market value. On equal-weight versus cap-weighted measures, the two have moved in opposite directions for eight straight weeks — the longest such streak since the mid-1990s. BTIG's Jonathan Krinsky warned the rotation will eventually stop, potentially bringing correlated, broad-based selling.