Momentum and private assets: The trends driving ETFs to record inflows

Why AI and Big Tech Still Offer Strong Investment Potential After Nasdaq’s Recent Decline

Investing is a lot like picking a team for a big game—you want the star players, but sometimes the quiet team members become the real heroes. That’s why it matters to know which parts of the market are hot and which ones might surprise you.

Why Investors Should Care

Right now, there’s a big debate about where the best gains are coming from. Tech stocks, especially those tied to artificial intelligence (AI), have had a great year. But after a tough week for the Nasdaq, some experts say it might be time to look at other sectors. This matters for your portfolio because what’s winning today might not win tomorrow—and being ready for change can protect your money.

Bull Case: Tech and AI Still Have Room to Run

  • Momentum is strong: Anna Paglia from State Street says investors don’t want to miss out on AI growth. She believes tech stocks could keep rising because people are still excited about their future.
  • Big gains this year: The SPDR NYSE Technology ETF is up 38% so far this year. That’s a huge jump compared to many other areas.
  • Long-term growth story: AI is changing how businesses work, and many believe the best is yet to come. According to McKinsey, AI could add up to $4.4 trillion to the global economy every year.

Bear Case: Time to Diversify and Watch for Rotations

  • Recent pullbacks: Even strong funds like the SPDR NYSE Technology ETF fell over 4% last week, and Palantir, a big AI name, dropped more than 11% after earnings.
  • Rotation to health care: Todd Rosenbluth points out that investors are starting to move money into health care stocks, which have been left behind most of the year but are now gaining ground.
  • Defensive move: Health care is seen as a “safe” sector when people get nervous about tech. The Health Care Select Sector SPDR Fund is up 5% since October 1 and was the second-best performing S&P 500 group this week.
  • Past lessons: History shows that when one sector gets too popular, it often cools off. For example, in early 2022, tech stocks fell sharply after a long run, while energy and health care gained ground (CNBC).
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What the Numbers Say

It’s not just talk—numbers back up these trends. Tech ETFs are still leading for the year, but health care is starting to catch up. According to ETF.com, tech-focused funds saw record inflows, but health care funds have picked up steam since October.

Investor Takeaway

  • Don’t put all your eggs in one basket: Even if tech and AI look strong, spreading your money out helps protect you from surprises.
  • Watch for sector shifts: Keep an eye on where money is moving—health care and other “defensive” areas could offer safer growth if tech cools off.
  • Stay flexible: Markets change fast. Be ready to adjust your investments if a sector starts to lose momentum.
  • Use the data: Look at performance numbers and expert studies, not just headlines, to guide your decisions.
  • Think long term: Chasing the hottest trend can be risky. Focus on what will help you grow and protect your money over time.

For the full original report, see CNBC

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