Now that the Republicans and Democrats have finally ended the shutdown after much wrangling, it seems that investors are simultaneously taking a step back. The substantial gains on AI-related stocks are being cashed in. Last week, I attended a conference in the US in which nearly 300 companies participated. It proved almost impossible to find companies that were not talking about data centers and AI. This is not surprising: it is now estimated that half of the US GDP growth comes from AI investments, while other large parts of the real economy are still growing at a modest rate. In many industries worldwide, it is mainly uncertainty about tariffs and trade policy that is slowing down investment decisions.

The key question for investors is therefore: which segments other than AI currently offer attractive opportunities?

Consumer sector: uneven recovery, selective opportunities

The climate remains challenging for US consumers. Interest rates are still high and the cost of goods and services has risen significantly in recent years. Purchasing power remains under pressure and consumers in the low and middle segments remain price-conscious. For companies with strong exposure to this group, it seems too early to price in a more sustainable recovery in consumer spending. A scenario in which inflation falls and the Fed eases monetary policy significantly could improve this picture, but that is not likely at the moment.

The higher consumer segment, on the other hand, continues to spend well. This offers selective opportunities, especially for companies that have pricing power and are less sensitive to macro volatility.

Another sector that is struggling is the software industry. The sector is still facing headwinds due to uncertainty about the role of AI agents and the potential disruption of traditional business models. Patience seems to be required here.

Industry, cars, and automation: first signs of recovery

The automotive sector has been under pressure in recent years, but is now showing the first signs of recovery in the US and Europe. The first rays of hope are also visible in the automation sector. Many companies postponed investments due to uncertainty about tariffs, but now that new factories are becoming operational in the US and returns on investment are improving, capital is starting to flow again.

Investments in healthcare also appear to be picking up, now that there is more clarity about future drug prices. This could support valuations in the sector.

Defense, infrastructure, water, and aerospace: structural winners

Some end markets have been performing well for some time and are expected to continue to do so. Defense is one such market. Budgets are increasing in both Europe and the US, partly due to rising geopolitical tensions that are unlikely to subside for the time being. The expected orders for the Golden Dome in the US are illustrative of this. Many defense stocks have fallen recently and remain attractive for long-term investors.

Infrastructure is also a structural growth pillar. New legislation and regulations should accelerate the necessary renewal of US infrastructure. Even in Europe, the first positive signs are emerging from the building and construction sector.

Aerospace is benefiting from a full recovery in travel behavior — the era of “flight shame” seems to be over. Orders books at aircraft manufacturers are continuing to fill up, which is also supporting the valuation of suppliers.

Defensive niches: stable value in volatile times

Industries that continue to operate regardless of economic conditions, such as waste management and insurance, have lagged recently as investors have shifted their capital toward AI exposure. However, this underperformance appears excessive given the stable cash flows and predictable growth in these sectors.

AI correction: opportunity or warning?

The recent correction in AI stocks appears to be primarily a normalization. Some names had run too far ahead of short-term developments, while disruptions in the supply chain (component shortages) mean that current demand cannot be met. However, the underlying trend remains intact; an abrupt reversal seems unlikely, but some delays in the pace of investment and/or data center construction capacity remain an uncertainty.

Author: Siegfried Kok

Siegfried Kok is Senior Portfolio Manager at OBAM Investment Management, the Dutch Asset Management Company of the OBAM N.V. fund, one of the oldest mutual fund in Europe founded in 1936.

Siegfried career includes portfolio management responsibilities at Kempen Asset Management, ABN Amro Asset Management and BNP Paribas Asset Management.

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