As AI Cools, These Sectors Heat Up

Market Overview - As market uncertainty and volatility increase, investor sentiment is shifting towards defensive and value-oriented sectors, leading to underperformance in high-growth areas like technology, semiconductors, and AI [1] - Energy has emerged as a leader in 2025, up 8.8% year-to-date, while Financials have gained 4.9%, both outperforming the broader market [2] Energy Sector - Energy stocks are trending higher as investors seek cash-generating assets in an uncertain market, similar to trends observed in 2022 [3] - Chevron (CVX) has generated over $15 billion in free cash flow in the trailing 12 months, resulting in a 5.1% free cash flow yield [4] - CVX has recently broken out from a three-year consolidation phase, indicating a major capital rotation from institutional investors into the stock [5] Insurance Sector - The insurance sector has gained 14% year-to-date, contrasting with the broader market index, which is down a few percent [8] - HCI Group has a Zacks Rank 1 (Strong Buy) and boasts a 19.7% free cash flow yield, significantly above the industry average [9] - HCI Group anticipates sales growth of 17.5% this year and earnings growth of 102%, currently trading at 9.9x forward earnings [9] Investment Opportunities - In a shifting market, CVX and HCI are highlighted as compelling investment opportunities due to their strong fundamentals and technical performance [12]