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This Data Shows Where the AI Trade Is Going
This Data Shows Where the AI Trade Is Going
BY KEITH KAPLAN
CEO, TRADESMITH
Nothing that can be done on a computer is safe…
Matt Shumer wrote that line earlier this month in a post that went viral.
Shumer isn’t a pundit or a journalist. For the past six years, he’s been building AI tools.
His essay, titled “Something Big Is Happening,” got 80 million views in a week. CBS put him on the morning news.
Shumer made the case that AI has crossed a line. It’s no longer just a chatbot. It’s now an autonomous agent – something that goes out on the internet, makes decisions, and completes complex tasks on its own, without waiting for you to guide it.
Here’s how he described his Monday morning as a software developer using AI agents to help him code:
I tell the AI what I want, walk away from my computer for four hours, and come back to find the work done. Done well, done better than I would have done it myself, with no corrections needed. […] I am no longer needed for the actual technical work of my job.
Wall Street read that. And it started selling.
Software-as-a-Service (SaaS) stocks like Salesforce (CRM), ServiceNow (NOW), and Adobe (ADBE) have collapsed into bear market territory. The ETF that tracks them is down more than 20% this year. Traders are calling it the “SaaSpocalypse.”
It’s not just SaaS companies. Popular AI plays are also struggling. Microsoft (MSFT) is down about 16% in 2026. Tesla (TSLA) is down about 10%. Even the mighty Nvidia (NVDA) has been dropping. Its stock sank 5% yesterday after reporting glowing earnings. And it’s now also in the red in 2026.
But the data is telling a different story in other parts of the market – one most investors aren’t seeing yet. While parts of the tech trade are blowing up, money is pouring into other sectors of the market.
And the destination isn’t random. It’s where the AI trade is headed next.
Today, we’ll use TradeSmith’s Short-Term Health tool to take a deeper dive. I’ll also share a list of 10 stocks to avoid and 10 to buy as this rotation continues.
Reading the Market’s Vital Signs
Short-Term Health shows you when stocks are in healthy uptrends, unhealthy downtrends, or transitions between the two.
It looks at how a stock has behaved historically to establish what’s normal for it – then flags when something changes.
It’s more sensitive to near-term trend shifts than our classic Long-Term Health indicator. But it works on the same traffic-light system:
- Green: The stock is in a healthy short-term uptrend and is a buy.
- Yellow: The stock has pulled back more than halfway to its stop loss – a caution sign.
- Red: The sell signal has triggered, and we’re waiting for a new buy signal.
The table below breaks down the S&P 500’s major sectors by their Short-Term Health. As you can see, the Technology ETF XLK entered a Red Zone three days ago. It joins the Financial Services and Consumer Cyclicals ETFs, which are already there.
That’s not a reason to panic. Short-Term Health is our most sensitive trend-shift indicator. All three sectors remain in their Long-Term Health Green Zones.
But it is a reason to be cautious – and to pay attention to where the money is flowing to now.
What Just Flipped
Since ChatGPT launched in November 2022, AI was the reason to be bullish on stocks. It drove the market to record highs and made tech the most powerful sector.
This year, something flipped.
Investors are pulling money out of sectors vulnerable to AI disruption – particularly software, legal, and financial companies. And they’re piling into Energy and Basic Materials instead.
Our distribution data makes this clear. It shows how many stocks in a sector are in Green, Yellow, and Red Zones.
As you can see in the table above, nearly all Basic Materials and Energy stocks are in Green Zones. That means they have the best overall health of all the S&P sectors. Meanwhile, 55% of Technology stocks, 44% of Financial stocks, and 30% of Consumer Discretionary stocks are in Red Zones.
That brings me to the two lists of stocks I mentioned – one to avoid, one to buy.
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10 Stocks to Avoid
For stocks to avoid, I screened TradeSmith Finance for stocks in the three sectors – Technology, Financials, and Consumer Discretionary – that recently entered Red Zones.
The results included some big, well-known names – and a few surprises.
BlackRock (BLK) and Intercontinental Exchange (ICE)flipped red on Wednesday. BlackRock manages more than $10 trillion. ICE runs the New York Stock Exchange. When companies like these roll over, the pressure on financials is broad – not just a few weak outliers.
Jack Henry & Associates (JKHY)makes the core banking software that thousands of community banks and credit unions run on. EPAM Systems (EPAM) builds custom software for large enterprises worldwide. Both sit squarely in the crosshairs of AI disruption.
Raymond James (RJF) has also flipped bearish. It serves millions of retail investors and financial advisors.
Interestingly, American Express (AXP) is on the list, too. It’s a bellwether for consumer spending among higher-income households. The market isn’t just worried about AI disruption – it may also be starting to price in a broader economic slowdown.
If autonomous agents can write code, manage workflows, and automate banking processes, companies selling those services to human teams become an obvious target for nervous investors.
If you’re holding any of these for the long term, this isn’t a reason to sell. But if your timeframe is months and you’re hoping for a quick profit, the trend is now against you.
10 Stocks to Buy
The flip side of that story is playing out in Energy and Basic Materials – and the names turning green there are equally telling.
EQT Corporation (EQT) and EOG Resources (EOG) stand out. EQT is one of the largest natural gas producers in the U.S. EOG is a major oil-and-gas explorer.
And Marathon Petroleum (MPC) is one of the largest refinery operators in the country.
If you’ve been following the AI story, the pattern is clear. These aren’t random winners – they’re critical infrastructure for the AI buildout.
Every data center running an AI model needs massive electricity. EQT and EOG supply the natural gas that powers those facilities. EQT recently signed a deal to supply gas to a 3,200-acre AI data center campus in Pennsylvania – one of the largest in North America.
Linde (LIN) and Air Products & Chemicals (APD) are the two largest industrial gas companies in the world. They supply the ultra-pure nitrogen, oxygen, hydrogen, and argon that semiconductor fabs need to manufacture chips.
Without these gases, Taiwan Semiconductor, Intel, and Samsung can’t produce the chips that power AI models. It’s not a glamorous business. But it sits at the foundation of the entire AI supply chain – and our Short-Term Health indicator says the market is starting to notice.
Wall Street is selling stocks in businesses AI threatens to replace – and buying the physical infrastructure stocks AI can’t exist without.
That’s not a hunch, gut feel, or guesswork. It’s what the data shows.
All the best,
Keith Kaplan
CEO, TradeSmith
P.S. Last year, I started posting on X because I wanted a place to share ideas, talk about the tools we’re building, and the actionable TradeSmith signals that catch my eye when I first log into our platform each day.
It’s my pure, unfiltered thoughts. And I post there every day. Come find me @KeithTradeSmith. I’d love to have you along for the ride.
