AI is Coming For Your Stocks – Here’s What You Need to Know

In the past weeks, many stocks have dropped sharply, even though the S&P 500 is still near its record high.

Daniel Pronk with over 260k subscribers pointed out that it feels like a crash is happening inside the index, but the overall market doesn’t look broken on the surface. 

For investors holding the wrong sectors, it has been a painful stretch, even as headlines continue to talk about strength at the top. This disconnect is one of the clearest signs that the market is rotating under pressure.

The S&P 500 Looks Fine, But the Average Stock Does Not

One of the most striking data points Daniel shared came from a post showing that the S&P 500 has been flat over the past month, but the average stock inside it has moved more than 10% up or down.

That kind of dispersion is extremely rare. Historically, similar moments have clustered around major market shocks. The index may look calm, but underneath, there is chaos.

Daniel also highlighted another statistic: in just eight trading sessions, more than 100 stocks in the S&P 500 dropped over 7% in a single day. That level of volatility is not normal for a market sitting near highs.

Read Also: Tech Panic Is Here: 5 Stocks That Could Be Generational Buys at These Levels

Money Is Rotating Out of Tech and Into Defensive Stocks

The market has not been selling everything equally. Instead, money has been flowing out of growth and software names, and into so-called “safe” sectors like consumer defensives, utilities, and industrial companies.

Daniel gave examples like Walmart, Costco, Pepsi, and Coca-Cola, which have seen strong inflows recently. Investors are treating these businesses as protection from uncertainty, especially from AI disruption.

The strange part is that many of these defensive stocks are now trading at extremely expensive valuations. Walmart, for example, is trading at over 40 times earnings, despite growing only around 5% per year. So the rotation is not purely about value. It’s about fear.

Read Also: India’s “Nvidia Moment” Is Happening – 6 High-Growth Stocks to Buy for 2026

AI Fear Is Driving the Sell-Off in Software

Daniel believes the biggest reason behind this rotation is the growing panic around artificial intelligence. Investors are dumping anything that feels even slightly exposed to AI disruption.

Software stocks have been hit especially hard. The selling has been broad, fast, and often indiscriminate. Many investors simply want out, even if the fundamentals have not collapsed yet.

The market is reacting to the idea that AI could replace or weaken certain business models much faster than expected.

Even companies with strong competitive positions are being sold because the narrative is spreading quickly.

However, Daniel also made an important point: AI will not destroy every software business. Some companies have strengths that AI cannot easily copy.

Firms with unique data, strong customer networks, or regulated systems may even benefit from AI.

Daniel gave Airbnb as an example, since its CEO said AI cannot replace its trusted users, reviews, payments, or host platform.

In other words, AI tools are available to everyone. What matters is what companies own that AI cannot copy.

The Market Is Creating Opportunities, But It’s Not Simple

Daniel compared this AI-driven sell-off to other past market scares. Many narratives come and go, but AI feels different because it represents a real technological shift.

Some legacy software companies may be vulnerable, especially those offering outdated products that customers already want alternatives to.

The sell-off may be going too far in some areas, creating selective opportunities for long-term investors. The key is being careful, not blindly buying every dip.

Read Also: Here’s Why the Crypto Market Is Rising Again With Bitcoin Back Above $70K

However, AI is changing investor behavior in real time. The market is rotating away from growth and software, and into businesses seen as harder to disrupt.

The S&P 500 may look stable near the top, but underneath, many stocks are already in deep corrections.

Daniel Pronk’s message is clear: this is not a market where everything moves together. AI is forcing investors to rethink which companies have durable advantages, and which ones could be replaced faster than expected. The next few years may reward investors who understand the difference.

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