As AI Cools, These Sectors Heat Up

As market uncertainty and volatility increase, investor sentiment is shifting. Defensive and value-oriented sectors are beginning to outperform, while high-growth areas, particularly technology, semiconductors, and AI—have come under pressure. The recent sell-off has hit these once-hot industries especially hard, as doubts begin to emerge around the massive AI infrastructure build-out.In contrast, Energy has emerged as a clear leader in 2025, up 8.8% year-to-date, while Financials have gained 4.9%, both outpacing the broader market. This sector rotation suggests investors are looking for stability, strong cash flows, and reasonable valuations.Two stocks that stand out in this environment are HCI Group (HCI), showing powerful price momentum and backed by a top Zacks Rank, and Chevron (CVX), which just staged a major technical breakout and could be poised for further upside.Image Source: TradingViewEnergy Stocks are Perking UpShares of energy stocks continue to trend higher as investors seek cash-generating assets in an increasingly uncertain market environment. Much like in 2022, when technology and more speculative stocks suffered sharp drawdowns, companies backed by real assets, such as those in the energy sector, are once again attracting renewed interest and capital.Though Chevron doesn’t have a top Zacks Rank (it currently has a Zacks Rank #3 (Hold) rating), it is still a company that generates tremendous cash flows while also enjoying a reasonable valuation. Chevron made over $15 billion in free cash flow in the trailing 12 months, giving it a respectable 5.1% FCF yield.Especially compelling is the price action in CVX. After consolidating for nearly three years, the stock has broken out from this large technical base. This action clearly indicates a major rotation of capital from institutional investors into the stock.Image Source: TradingViewInsurance Stocks are Quietly Leading the MarketFinancial stocks and more specifically, insurance stocks have been another real bright spot in the market. While the broad market index is down a few percent year-to-date (YTD), the insurance sector has gained 14% over the same period. Like energy, some of the leading insurance companies enjoy huge profits thanks to the advantaged business model.In addition to a Zacks Rank #1 (Strong Buy) rating, HCI Group has an incredible 19.7% FCF yield, which is well above the industry average and its 10-year median yield of 14.3%.HCI Group expects sales growth of 17.5% this year and earnings growth of 102%. The company is currently trading at 9.9x forward earnings and the stock just made a new record high today, indicating strong buying momentum.Image Source: Zacks Investment ResearchShould Investors Buy Shares in CVX and HCI?While AI and technology stocks falter, select names in energy and insurance are breaking out on strong fundamentals and technicals. For investors seeking stability, cash flow, and upside potential in a shifting market, CVX and HCI are two names worth watching closely.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chevron Corporation (CVX): Free Stock Analysis Report HCI Group, Inc. (HCI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks