Markets Brief: The Big 2026 Sector Rotation as AI Disrupts the Disruptors

With most of the Big Tech earnings reports behind us, widening concerns about the costs of the artificial intelligence boom are rattling markets and injecting a fresh dose of volatility into portfolios. Friday may have seen a sizable rebound in beaten-up tech stocks, but that doesn’t mean those worries are gone.

In fact, while stocks are slightly up to start 2026, under the surface, there has been a major change of leadership away from tech. What’s driving that shift, and will this rotation and volatility continue?

Stock Sector Rotation

As worries about tech stocks have spread, investors have looked elsewhere to put money to work. Energy stocks have been big winners, thanks to a roughly 12% jump in oil prices so far this year. The result has been a significant performance gap between tech and energy stocks. Prior to Friday’s rebound in tech, that gap was 25 percentage points. While it shrank to end the week, there is still a noticeable shift at play. We’ll be taking a closer look at the market rotation here on Morningstar.com early this week.

The AI Disruption Risk Hits Tech

The major catalysts for this change in stock market leadership are the growing ranks of unknowns around AI’s impact on the tech industry. In 2024 and much of 2025, the picture for tech stocks was seen as all good news, with real economy companies expected to spend huge amounts of money on AI to improve efficiencies. However, investors are increasingly worried about the impact that the historic level of capital expenditure spending on AI by companies such as Amazon AMZN will have on future tech company profits.

Goldman Sachs’ portfolio strategy research team offered some thoughts on why investors are unnerved: “The issue is not earnings today—but uncertainty around margins tomorrow. Analyst estimates have not fallen. This may be a positive—and certainly reflects analysts’ views that there is no clear near-term danger to profits. But it also suggests the issue is uncertainty on the level of margins.”

At the same time, investor are also concerned that AI disruptors are coming for software company profits. This worry has been building for some time, but it was magnified last week when AI startup Anthropic – creator of Claude – released a new tool designed to automate legal work, sending info services and big software stocks plummeting. Could new AI tools automate away the need for software as we know it?

Bigger picture, Goldman’s team had this to say about disruption patterns and the stock market:

Crypto Implosion

Although Friday brought a sharp bounce for markets that have been beaten down lately, there’s no sugarcoating the massive drop in the price of bitcoin seen in recent months. Starting in October, the value of the cryptocurrency was essentially cut in half, falling below $65,000 last week from a record high north of $126,000 that month. Friday’s rebound took bitcoin back above $70,000.

As with anything related to bitcoin, it is difficult to really know why the massive plunge has taken place. Analysts say that leveraged players, who had bought bitcoin and other cryptocurrencies with borrowed money, appear to be forced sellers. That usually leads to exaggerated swings. The cryptocurrency world is now awash with quotes about a “crypto winter”—what elsewhere on Wall Street would be called a long bear market.

Coinbase Earnings Ahead

Amid this massive volatility in bitcoin, Coinbase COIN, the dominant cryptocurrency exchange in the United States, is getting ready to report earnings after the closing bell on Thursday, Feb. 12. Coinbase stock often acts like a leveraged play on bitcoin prices, so it’s been on quite the roller coaster lately.

Here’s what Michael Miller, who follows Coinbase for Morningstar, will be watching for:

Jobs and Inflation Data Ahead This Week

After a brief delay thanks to the partial federal government shutdown, the January jobs report is due to be released Wednesday morning. As we flagged last week, economists are expecting some improvement in hiring from the last few months although the overall picture is one of a soft labor market.

For now, at least, economists aren’t worried about a material worsening of the hiring picture. “The labor market is still in good shape, just not as good as it was in 2023 and 2024,” says Gus Faucher, chief economist at PNC Bank. Our full jobs report preview can be found here.

Then on Friday, we will see fresh inflation data courtesy of the January Consumer Price Index report. Economists expect a generally friendly set of numbers, with an easing of inflation pressure on both a monthly and annual basis. When it comes to the year-over-year numbers, the CPI is forecast to rise 2.5% for both the overall reading and excluding food and energy, according to FactSet.

We’ll have our full inflation preview out Wednesday. In the meantime, here’s how the CPI data looked as of last month’s report: