Markets are churning furiously beneath a calm surface

Subscribe to enjoy similar stories. AN INVESTOR WAKING from a stupor that began on New Year’s Eve might question whether they had missed anything. The S&P 500 share index of big American firms sits almost exactly where it did at the end of 2025: nearly at a record high.

There has been no shortage of geopolitical drama, but little sign of it in the trajectory of the world’s most watched index. Beneath this calm surface, however, the churn in America’s financial markets has been furious. A panic about what artificial intelligence will do to business models has prompted software firms’ stock prices to tumble: they are more than 30% below a recent peak last year.

And it is not just software companies that investors worry will be disrupted by the rise of AI agents and “vibe coding". Waves of share-price volatility have rippled through sectors as varied as trucking and commercial real estate. So far index investors’ losses have been offset by the gains from a gaggle of winners.

Just as some sectors have been slammed, investors have clamoured for “HALO" stocks (heavy assets, low obsolescence). Energy and commodities firms have benefited, as have sturdy utilities and companies selling consumer staples. Within the tech sector, those making the hardware that powers AI have boomed (see chart 1).

The share price of Sandisk, which designs and manufactures memory chips, has more than doubled since the start of the year. Much more reassessment lies ahead, since investors still know little about how AI will eventually reshape businesses. And there is no guarantee that the fragile balance between winners and losers will continue to hold.