Anything not tied to artificial intelligence took off this week

For the week through Thursday, the S&P ex-AI index gained 2.4% while the S&P 500 fell nearly 1%, a 3.29-percentage-point outperformance that would be the ex-AI index’s second-largest weekly lead since early 2024. Several non-AI S&P 500 stocks also rose sharply, including Fair Isaac (+almost 14%), Equifax (+10.4%), and Darden Restaurants (+10.3%). The move reflects investors reassessing the market’s concentration in AI-related stocks, although the ex-AI benchmark still trails the S&P 500 over the long term.

Analysis

This is a breadth and positioning signal, not yet evidence that earnings leadership has durably shifted. A sharp ex-AI rally can reflect crowded mega-cap exposure unwinding and short-covering; the newly created benchmark’s limited back history also makes its historical comparisons a weak basis for extrapolation. Its AI-exclusion screen is a portfolio classification, not a clean economic boundary: firms such as FICO and Equifax may benefit from using AI while also facing substitution, pricing, and regulatory risks. Darden’s consumer exposure and Brown-Forman’s category-specific demand risks are distinct from the compounder thesis.

Over days to weeks, momentum may persist if market breadth improves, but the stocks with the largest weekly gains carry reversal risk. Over 1–3 months, earnings revisions and relative performance across a broader set of non-AI companies matter more than index labels. Over 6–18 months, a durable rotation would require earnings growth to broaden or AI leaders’ growth/capex expectations to reset; neither is established here. A reversal in breadth or renewed concentration in mega-cap leadership would falsify the rotation thesis.

Key Decisions for Investors

• Do not chase this week’s sharp moves in FICO, EFX, or DRI on this evidence alone. Track equal-weight versus cap-weight S&P performance and the share of constituents with positive earnings revisions as confirmation signals.
• Tactical watch: if breadth continues improving over the next several weeks, consider a modest long RSP / short SPY relative-value position to express deconcentration, not a view that AI is structurally impaired. Reduce or exit if relative strength reverses or earnings breadth fails to confirm.
• For FICO and EFX, verify upcoming guidance, pricing trends, and evidence that AI adoption is improving productivity without weakening pricing power; absent that evidence, treat the rally as technical rather than a change in fundamentals.
• No standalone trade in the non-AI index: its screening methodology and short backtest history limit its value as a validated hedge. Reassess after earnings revisions and market breadth provide confirmation.