AI spending boosts industrials and utilities with immediate earnings, while tech faces valuation pressures.

Industrials and utilities sectors are benefiting first from the current wave of AI-related capital spending, as they provide the physical infrastructure like data centers and power grids needed for AI systems. Meanwhile, technology companies, despite driving AI investment, may see delayed earnings growth and face valuation challenges due to stretched prices and rising interest rates. This shift highlights opportunities in sectors tied to physical infrastructure and energy, contrasting with the higher near-term risks in tech stocks, which depend heavily on future cash flows. Investors should consider sector-specific funds like State Street's industrial and utilities ETFs for exposure to these trends.