Goldman Sachs' non-AI index rose 12.4% last week, outperforming the S&P 500; Oppenheimer and Berkshire shift toward non-tech sectors

A Goldman Sachs-tracked stock index excluding artificial intelligence (AI) stocks rose 12.4% last week, outperforming the S&P 500's overall 12% gain over the same period. Many non-AI sectors of the S&P 500 rose this month, while the S&P Technology Index has fallen 7% month-to-date. Notably, the portfolios of large investment institutions such as Oppenheimer and Berkshire Hathaway have all shifted toward non-technology sectors.

Data shows that as of October 22, the proprietary Goldman Sachs index tracking the S&P 500 (excluding stocks classified as "AI-enabled") had risen 12.4%, above the S&P 500's 12% gain. Goldman Sachs launched this gauge earlier this year together with S&P, excluding the stocks of AI-enabled companies.

Technology and AI-related companies account for about 45% of the S&P 500. This heavy weighting has powered the index for years, but has recently become a burden. The S&P 500 technology sector is down about 7% this month, while other sectors have held onto gains.

Investors are worried about the debt and equity issued by companies such as CoreWeave and Oracle. Meta Platforms fell 7% last Thursday to $648.85 and continued to decline on Friday, down nearly 8% cumulatively from its pre-earnings close. Just a month earlier, it was only a few dollars away from its all-time high of $796 set in August 2025. The decline was mainly because the company earlier announced more plans to spend heavily on capital expenditure and issue additional shares. The market worries that its ever-rising AI investment will trigger a bubble.

Companies that provide power and equipment for AI data center expansion have also been hit hard. General Electric Vernova, Bloom Energy, Vistra and Quanta Services and other related companies have also fallen sharply in the recent selloff.

Later this week, the Federal Reserve is about to announce its interest rate decision, which will also affect market sentiment and the trajectory of AI stocks. Cui Xiao, senior economist at Swiss Pictet Wealth Management, told Yicai that the Federal Open Market Committee (FOMC) is expected to keep rates unchanged at 3.75%~4.00% this week, and the overall policy signal released will be consistent with the market's general expectation of another rate hike in December. At the subsequent press conference, Fed Chair Warsh is expected to avoid directly commenting on AI-related market volatility, but will reiterate his previous view that AI is boosting demand in the short term and will expand supply in the medium term.

AI is not only driving the stock market, but is also becoming increasingly important to the credit market. Alyssa Irving, fixed income fund manager at Wellington Investment Management, told Yicai that the massive infrastructure spending required by AI may still be in its early stages, but its impact on the credit market is already increasingly clear: higher capital intensity, increased credit supply, and greater divergence between sectors and issuers.

For investors, she said, the challenge is to distinguish which companies can turn AI-related investment into sustainable returns and which cannot. As AI investment increasingly becomes an important driver of market performance, prudent analysis of capital allocation, financing and execution risk may be crucial.

Although AI infrastructure spending generally supports credit demand, its investment impact varies significantly across sectors: investment-grade credit investors focus on the balance between growth and rising capital intensity; high-yield credit investors see growing divergence between AI beneficiaries and AI-hit issuers; and securitized credit investors focus on deal structure and repayment assumptions.

"As a result, investment opportunities in the credit market are becoming more differentiated, mainly market differentiation rather than a broad rise in risk," she said. "Companies directly related to AI infrastructure construction, such as hyperscalers, semiconductor companies and infrastructure providers, are generally benefiting from stronger growth, and some have seen their fundamentals improve. However, for companies that are making large-scale investments merely to stay competitive, the situation is more complicated. If the path to monetizing investment is uncertain, high capital expenditure may put pressure on cash flow and leverage metrics. This divergence may further intensify differentiation within the investment-grade credit market and further highlight the importance of issuer-level analysis and prudent capital allocation."

Shifting to non-technology sectors

For most of this year, the proprietary Goldman Sachs index tracking the S&P 500 (excluding stocks classified as "AI-enabled") lagged the S&P 500, as investors long favored chipmakers, cloud computing companies and other companies benefiting from massive AI spending. However, this advantage has continued to narrow this month and disappeared entirely last week.

Meanwhile, investors are turning to defensive areas. This month, ETFs such as the State Street Consumer Staples Select Sector SPDR ETF, the State Street Health Care Select Sector SPDR ETF and the State Street Utilities Select Sector SPDR ETF rose 7%~10%. The energy sector also rose 10% overall.

Many analysts recommend shifting to non-AI companies to diversify investments and protect investors from further pain from a technology stock decline. Oppenheimer technical analyst Ari Wald wrote in an October 24 report that "over the past two weeks, the pendulum of AI investment has swung toward non-AI stock exposure." Oppenheimer's two currently favored sectors are business services and insurance. Last week, the firm upgraded these sectors to overweight and recommended several sector stocks, including Republic Services, Cintas, Verisk Analytics, Broadridge Financial Solutions, MetLife and Arthur J. Gallagher.

Berkshire Hathaway is also shifting toward non-technology sectors, and its Class B shares have risen 8% this month. Berkshire currently owns numerous operating companies, including insurance giant Geico and BNSF Railway. It also holds a $364 billion stock portfolio, including Apple, Coca-Cola, Alphabet and Bank of America. If technology stocks drag down the S&P 500, this diversified portfolio will help Berkshire continue to outperform the broader market.

Institution Trivector Research sees potential in "non-technology conglomerates." Health care giant Eli Lilly is one of its favored investment targets. Thanks to the strong performance of Eli Lilly's weight-loss drugs, the stock has risen 22%. The company is developing more drugs, including a next-generation weight-loss drug it plans to submit to the U.S. Food and Drug Administration for approval in early 2027.

Cruise operator Viking Holdings is also increasingly favored by institutions. The company said on its August earnings call that bookings for 2027 are rising, and "in recent events, our customers have shown resilience." Viking shares have risen 15% this year and may have further room to run. The Wall Street average target is $109, above the recent price of around $82. Barclays recently upgraded it to overweight with a target price of $102.