By Paul R. La Monica

Tech stocks are tumbling, and that's OK -- as long as you remember that there's more to the market than artificial intelligence.

On the surface, the stock market looks like it's suffering from one of its periodic run-of-the-mill pullbacks. The Dow Jones Industrial Average and S&P 500 have fallen only 0.8% and 0.9%, respectively, this week, while the Nasdaq Composite has dropped 1.1% -- and all three remain near record highs.

Zoom in, however, and the damage is worse than the headline numbers suggest. The Roundhill Magnificent Seven exchange-traded fund is off about 1.5%, with Amazon.com, Alphabet, and Meta Platforms in particular taking it on the chin. The drops for more speculative AI favorites have been even sharper. Nuclear energy company Oklo, which isn't expected to turn a profit this year or in 2026, has slumped more than 10% this week. Oracle, whose stock surged after it signed a big deal with OpenAI earlier this month, has dropped 5%. And memory-chip maker Micron Technology has declined 4%.

The pullback is a sign that investors might want to consider broadening their portfolios beyond the frothiest AI plays. "It's a tricky time for stocks," says Katy Kaminski, chief research strategist at AlphaSimplex. "There is definitely a concern about hype."

The only problem: The U.S. market is heavily tilted toward Big Tech. To escape its gravitational pull, Edison Byzyka, chief investment officer at Credent Wealth Management, thinks that investors should be looking at the equal-weighted S&P 500, which has lagged behind the broader market this year, over the main index. The Invesco S&P 500 Equal Weight ETF trades for only about 16.5 times 2026 profit forecasts, below the S&P 500's 22 times.

"With valuations for megacaps this high, investors need to ask where they want to be over the next 12 months," Byzyka told Barron's. He added that industrials and healthcare stocks look particularly attractive.

Yet AI is more than Big Tech. It's been the undeniable theme on Wall Street, and has seeped into the shares of industrials like Amphenol and Vertiv, utilities like Constellation Energy and Vistra, and gas pipelines like Williams, all of which have rallied this year. A better bet might be to look overseas, says Ron Albahary, chief investment officer at wealth-management firm LNW, who is nervous about U.S. stocks getting too frothy.

"You have to question if this bull market is getting extended," he says. "An American bias has worked for the past few years, but non-U.S. stocks have been doing well for the past few months or so. That's somewhat due to the weakening dollar but also because of better valuations. You want to see that rotation."

AlphaSimplex's Kaminski recommends looking to Europe, Australasia, and Far East, or EAFE, markets, noting that international stocks are "interesting for the first time in a long time" as earnings growth starts to pick up. They're still fairly cheap too, with the iShares MSCI EAFE ETF trading for less than 15 times earnings estimates for 2026.

There's more to the market than AI -- and it's time to wake up to that fact.

Write to Paul R. La Monica at paul.lamonica@barrons.com

To subscribe to Barron's, visit http://www.barrons.com/subscribe

(END) Dow Jones Newswires

September 26, 2025 21:30 ET (01:30 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.