- Defensive stocks gained as investors moved away from semiconductor and AI-linked names after sell-off
- Consumer staples and healthcare shares, including Walmart and Johnson & Johnson, rose nearly 2%
- IBM jumped 4% after JPMorgan upgraded it to Overweight amid broader US market recovery
Defensive stocks gained favour on Tuesday as investors moved away from semiconductor and AI-linked names following a sharp global sell-off in chipmakers, raising questions over the sustainability of the artificial intelligence-led market rally.
Consumer staples and healthcare stocks outperformed, with shares of Walmart, Procter & Gamble and Johnson & Johnson rising nearly 2%. Merck and Sherwin-Williams also traded higher, while International Business Machines (IBM) jumped 4% after JPMorgan upgraded the stock to "Overweight."
The broader US market recovered from its intraday lows as gains in defensive stocks, along with advances in technology giants such as Microsoft and Amazon, helped offset some of the weakness in semiconductor shares.
The rotation followed a global technology sell-off that began with a 1.3% decline in the Nasdaq on Monday, led primarily by weakness in Alphabet. The negative sentiment spread to Asia, where South Korea's Kospi Index fell nearly 10%, weighed down by a more than 12% plunge in memory chipmaker SK Hynix. The sharp decline ended an eight-day winning streak for Japan's Nikkei 225, which fell 3.55%.
US semiconductor stocks also came under heavy pressure. Micron Technology slumped 12%, while SanDisk lost 11%. Seagate Technology fell more than 7%, and chipmakers Intel and Qualcomm each declined around 7%. Advanced Micro Devices (AMD) also dropped about 6%, while Nvidia fell nearly 3%.
ALSO READ: SanDisk, Micron, AMD, Intel Crash Up To 12% As Chip Stocks Sell-Off Hits Wall Street
"The risk-off trade reflects fear AI exuberance may be overdone," Chris Low of FHN Financial told Bloomberg.
The move into defensive sectors suggested investors were seeking relatively stable earnings and cash flows as concerns mounted over lofty valuations in AI-related stocks.
Outside the semiconductor sector space, Microsoft and Amazon outperformed many technology peers, indicating that investors remained selective rather than abandoning technology altogether.
Meanwhile, Goldman Sachs shares fell more than 1%, reflecting broader weakness across parts of the financial sector as investors adopted a more cautious stance.
The latest market action highlights a shift in investor positioning after months of strong gains driven by enthusiasm around artificial intelligence, with money flowing into traditionally defensive sectors such as consumer staples and healthcare while high-growth chip stocks faced renewed selling pressure.
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