Where Capital Is Moving at the End of 2025: Investors Are Not Abandoning AI — They Are Balancing It

• Investors are not fleeing artificial intelligence, they are balancing it. Fearing excessive exposure to the AI theme, they are rotating towards sectors with more stable earnings (healthcare, materials, financials, energy) and adding positions in traditional industries as portfolio stabilisers.
• The construction of the portfolio itself is gaining importance: Equal-weight indices, a focus on quality, exposure to the low-volatility factor and simple options strategies help reduce dependence on the largest AI-related companies.
• Investors are combining rotation within equities with alternative hedges: Changes in equity allocation reduce the risk of excessive concentration, while at the same time many are adding precious metals and mining stocks to build a broader buffer against rising market volatility.

Artificial intelligence has been the leading market theme over the past two years, but even the strongest trends eventually show signs of slowing.

This month, the tech segment most closely tied to AI has weakened slightly, while healthcare, materials, financials and energy are leading the S&P 500. Many investors are therefore asking how to invest in AI over the long term without becoming overly exposed to short-term fluctuations.

Charu Chanana, Chief Investment Strategist at Saxo, explains what steps investors are taking today, why these approaches are gaining popularity and which risks are worth keeping in mind.

1. Rotation Towards Stability and “Old Economy” Leaders

With the Nasdaq 100 down 1.3% month to date and the Dow up around 2%, investors are increasingly reallocating capital to segments of the market characterised by more stable earnings and lower sensitivity to sentiment around artificial intelligence.

Where Is the Money Flowing?

This month, the best performers include:

• Healthcare (+5.9%)
• Materials (+3.3%)
• Financials (+2.5%)
• Energy sector (+2.3%)
• Consumer staples and real estate (both in positive territory)
• Utilities (slightly positive)

Source: Bloomberg

Why These Sectors Attract Capital

These sectors typically offer:

• Stable earnings and cash flows, relatively resilient to the economic cycle.
• Lower valuations compared with the tech segment most closely tied to AI.
• Greater predictability of results.
• Less dependence on market sentiment.
• Lower volatility, allowing them to serve as portfolio stabilisers when AI leaders experience elevated volatility.

What This Rotation Is Really About

Instead of withdrawing from technology outright, investors are rebalancing AI-heavy portfolios by adding exposure to sectors
with clearer demand drivers, more predictable fundamentals and undemanding valuations. This allows them to maintain
long-term exposure to AI while limiting the risk of short-term volatility.

Risks to Keep in Mind

• Defensive and “old economy” sectors can significantly lag if the tech segment stages a sharp rebound.
• Global growth slowdown may hurt industrials, materials and banks.
• Energy and materials sectors are exposed to volatility stemming from cyclical commodity prices.
• Excessive rotation may reduce exposure to long-term structural growth powered by artificial intelligence.

2. Portfolio-Level Adjustments to Reduce Concentration Risk

Some investors are hedging their AI exposure through the portfolio construction itself, rather than only through the
selection of individual assets. The most common approaches include:

• Equal-weight indices: limit concentration in the largest companies.
• Shift towards quality: favour companies with stable earnings and strong balance sheets.
• Low-volatility exposure: smooth the performance of the portfolio during periods of elevated volatility.

Risks

• They may underperform in strong, tech-led bull markets.
• The prices of low-volatility assets may rise as more investors seek to avoid volatility.

3. Rotation Towards Technology with Better Valuation Support

Not all technology companies are experiencing the same valuation pressure. Investors are rotating selectively within tech, rather than abandoning it altogether.

They are shifting towards areas with clearer earnings visibility and less AI-related “noise”, such as:

• Providers of infrastructure and industrial solutions that underpin the build-out of data centres.
• The energy sector and utilities benefiting from rising electricity demand.
• Asian technology and semiconductors, often trading at more reasonable valuations.
• Japanese automation and robotics, supported by capex trends and reshoring.

These segments allow investors to stay close to structural trends — digitalisation, capex cycles, innovation in
healthcare and energy demand — without the valuation risk associated with a handful of mega-cap AI leaders.

Risks

• Sector rotation may lag during a powerful, broad-based tech rally.
• Growth-sensitive sectors may weaken if the US economy slows.
• China and Asia face regulatory and sentiment risks and may be more sensitive to export cycles.
• Currency fluctuations can affect returns for global investors.
• Rotation within technology still leaves exposure to the broader tech cycle.

4. Adding Gold, Silver and Mining Stocks as Defensive Hedges

Gold and silver remain popular hedges against turbulence in highly valued sectors.

Why They Are Used

• They often diversify the portfolio during equity market drawdowns.
• Mining companies can offer leveraged exposure to rising metal prices.
• Silver can benefit both from industrial demand (including photovoltaics) and from its role as a “safe haven”.

Risks

• Metal prices are sensitive to currency moves and interest rate expectations.
• Mining companies carry operational and cost-related risks.
• Hedges do not always perform as expected in the short term.

5. Simple Options Strategies for Greater Stability

• Protective puts: Basic insurance against major market declines.
• Covered calls: Generate additional income on existing holdings to cushion milder corrections.
• Put spreads: More cost-efficient protection by combining two put options.

These strategies help manage volatility while allowing investors to stay invested in long-term themes.

Risks

• Put options cost money and can reduce the portfolio’s overall return.
• Covered calls cap the upside potential.
• Option-based hedges lose effectiveness when volatility declines.