Nov 14, 2025

Subject: Need to Know: Wells Fargo is Calling Time on Tech Stocks, Favors These Sectors Instead

Summary:

Wells Fargo Investment Institute has downgraded the S&P 500 Information Technology sector from favorable to neutral, citing elevated valuations and elevated expectations that increase the sector’s vulnerability to negative surprises. Despite robust AI-driven capital expenditures and beating earnings reports from big tech companies, concerns over return on investment and debt financing have unsettled markets.

Key Points:

– The AI trade, led by companies like Nvidia, initially surged but recent challenges (e.g., CoreWeave guidance cut) have dampened sentiment.

– Wells Fargo recommends locking in gains by trimming IT exposure back to market weight due to the risk of short-term disappointments.

– Favorable sectors for investment include industrials and utilities, which provide participation in AI’s data center boom but with lower valuations.

– Financials are also favored due to benefits from a steepening yield curve, a better regulatory environment, and active involvement in AI-related M&A and financing.

Market Snapshot:

– U.S. stock futures showed mixed direction; bond markets closed for Veterans Day.

– Gold prices rose back above $4,100 per ounce.

– Crude oil prices slipped slightly.

– Market indices like S&P 500 and Nasdaq Composite gained modestly.

Buzz:

– U.S. Senate has passed a compromise to end the government shutdown.

– Recent negative guidance from CoreWeave overshadowed its strong revenue beat.

– Nvidia stock declined after SoftBank sold a large stake to increase its AI investment.

– Beyond Meat shares dropped due to weak sales forecast.

– Fed Governor Michael Barr scheduled to speak.

Top Market Searches:

– Nvidia (NVDA), Tesla (TSLA), Palantir Technologies (PLTR), Beyond Meat (BYND), and others.

Additional Notes:

– The sector’s current valuation levels suggest caution as even modest earnings misses could trigger sell-offs.

– Ancillary AI beneficiaries in industrials and utilities sectors offer lower risk exposure relative to high-flying tech stocks.

– Financials’ discount to the S&P 500 could present value buying opportunities in the context of AI-driven financing activities.

[End of Summary]

Stay Well!