By Teresa Rivas

AI can help us shop, but what is more human than overspending after getting a big check?

Worries that artificial intelligence will be able to replace multiple industries -- from software to shipping logistics -- have dominated markets in recent weeks. Amid the selloff, companies that make or sell physical things that can't easily be displaced by AI have emerged as winners. Retailers such as Walmart, Home Depot, Costco Wholesale, and AutoZone are up double digits year to date, as is the State Street Consumer Staples Select Sector SPDR exchange-traded fund.

Of course, "moves this sharp driven by narrative and/or fear usually have a way of reversing themselves," notes Jefferies analyst Carey Kaufman in his weekly consumer roundup.

That kind of knee-jerk reaction seems ripe to even out as panic gives way to more measured trading. Even winners such as Walmart appear vulnerable in the near term, as "the sharp move higher in a company this large and established seems very unsustainable," according to 22V Research's Jeff Jacobson. "Perhaps when they report earnings this week that may throw some cold water on this upside momentum?"

But the reason to like select retailers going forward isn't how well likely overbought defensive stocks have done. It's how long some can keep winning in the next few months, as larger tax refunds start to hit consumers' pocketbooks.

Tax refund activity typically accelerates around this point in the year, and early filing data shows refunds are up about 11% from last year, largely due to changes codified into law by the One Big Beautiful Bill, including a higher standard deduction, expanded senior deductions, and new deductions for tips.

"We think some investors are dismissing higher tax refunds as a one-time benefit and short-term boost," writes Baird analyst Jonathan Komp. "We view the potential boost differently, since any uptick in spending at retail has potential to also lift retailers' future orders thus providing a longer tail of potential benefits for our covered brands beyond just a short-term factor."

Some retailers may benefit from a combination of tax refunds and seasonal demand. Sporting-goods sellers such as Academy Sports & Outdoors, footwear companies like Crocs, and more fashion-oriented brands including Gap and American Eagle Outfitters could all see a lift. Off-price retailers such as Burlington Stores, meanwhile, have historically enjoyed outsize gains around tax season driven by refund-related spending.

Kaufman sees off-price retailers to remain near peak valuation through the back-to-school season in the fall. For mass retailers, he believes the tide will be in their favor for at least a few months, with stocks moving "to peak valuations in the first half" of the year. Timing, however, is tricky. "The big risk," he warns, "is momentum turns to selling when 'this' is over and the decline is even more rapid than the rise."

Retail earnings season is just getting under way, which could provide an additional near-term boost if companies deliver upbeat guidance.

Still, Guggenheim analyst Simeon Siegel cautions investors to remain selective. "Despite the rhetoric overtaking the narrative, when direct competitors see directly opposing results, we believe it is hard to blame the typically-easy-to-blame top-down macro pressures."

Investors don't have to bet on retailers forever -- but spring may be coming for the sector.

Write to Teresa Rivas at teresa.rivas@barrons.com

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(END) Dow Jones Newswires

February 21, 2026 09:29 ET (14:29 GMT)

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