Investors are shifting from technology stocks into defensive sectors as markets enter a "state of alert," according to analysts tracking the rotation.
The Nasdaq Composite, home to Nvidia, Microsoft, Alphabet and Apple, rose 8.7% year-to-date through Nov. 9 but fell 5.3% in October and remains down 0.7% for November after dipping into correction territory last week. Concerns about artificial intelligence capital expenditure, cash flow, debt and financing have fueled volatility throughout 2026.
The MSCI World Information Technology index lost 7% in October and fell a further 4.6% this month. South Korea's Kospi, heavily exposed to semiconductors, dropped 16.2% in October and is down more than 8% month-to-date. The MSCI U.S. IT index is down 11.5% since October.
Defensive stocks have gained broadly. MSCI indexes covering consumer staples, healthcare and utilities have all risen over the past month. In the S&P Global 1200, healthcare and consumer staples ranked among the best performers in the second half of 2026, while the IT sector tumbled more than 11% to become the worst performer after rising 28.4% in the first half.
Alastair Pinder, HSBC's head of emerging markets and global equity strategy, said the recent moves appeared "vicious, and in our view, overdone." He noted U.S. semiconductors trade on a 12-month forward PE of 13.5x after a 45% de-rating since June, while Walmart trades on 40x forward earnings near a record high and Nvidia trades on 13x near a record low. "The rotation into defensives looks extreme," Pinder said.
Russ Mould, investment director at AJ Bell, said the market moves "can help stock pickers with their selections" and called equity markets "in a state of alert, judging by how investors are rotating their sector exposures."
The Democrats' sweep of Congress in the U.S. midterm elections amplified pressure on the tech sector last week.