Wall Street saw a dramatic rotation this week, as investors fled once-reliable software stocks in the wake of mounting fears that generative artificial intelligence could permanently erode demand for traditional digital services.

Names that once defined growth and innovation are now under pressure, as emerging AI platforms such as Anthropic's Claude Cowork and Google's Genie 3 threatened to cannibalize the very sectors they helped build.

While tech sold off sharply, the Dow Jones Industrial Average notched fresh record highs Friday, topping the 50,000-point milestone, with its limited tech exposure proving to be a key advantage.

The blue-chip index outperformed the Nasdaq 100 for seven consecutive sessions, its longest such stretch in nearly four years.

Chart Of The Week: Dow Jones Rallies To Records, While Software’s AI-Trade Falls Apart

According to Gina Bolvin, president of Bolvin Wealth Management Group, the takeaway for investors is to “lean into quality businesses with strong earnings power and be prepared for more rotation, not straight-line gains.”

The pivot away from tech was not just financial — it was also tied to labor concerns.

The latest Challenger, Gray & Christmas report announced 108,435 job cuts in January, up 205% from December. AI accounted for 7,624 of those, or 7%, the highest monthly share since tracking began in 2023.

In short, investors are questioning the once-unshakable dominance of software and tech. If AI is the disruptor, then value, cyclicals and tangible businesses may be the beneficiaries.

Image created using artificial intelligence via Midjourney.