Defensive stocks climb as tech slides on AI concerns

Investing.com -- Defensive stocks like Philip Morris (NYSE:PM), Proctor and Gamble (NYSE:PG), Abbott (NYSE:ABT), Merck (NYSE:MRK), and Johnson and Johnson (NYSE:JNJ) registered gains in the latest trading session, with increases of 2.25%, 2%, 3%, 1.7%, and 3% respectively. Apple (NASDAQ:AAPL) also rose by 3%. This movement comes as the market sees a shift from tech stocks to safer investments amid growing concerns over the impact of China's DeepSeek on the tech sector, particularly AI-related companies.

The Dow edged up by 0.2% even as the Nasdaq fell over 3%, indicating a clear rotation towards defensive stocks. Health care and consumer staples sectors, often considered safe havens, saw their indices rise by as much as 1.7% and 1.9%, reaching their highest intraday levels since early December and February, respectively. This surge reflects investor anxiety following the emergence of DeepSeek, a low-cost Chinese AI model, which has caused a significant drop in US tech stocks.

DeepSeek's introduction of a free AI assistant, which claims to utilize cheaper chips and less data, has challenged the prevailing market assumption that AI technology will drive demand across the supply chain from chipmakers to data centers. The news has particularly affected shares of Nvidia (NASDAQ:NVDA) and other companies that have been benefiting from AI investments.

Utilities also gained, with American Water (NYSE:AWK) Works, Consolidated Edison (NYSE:ED), and EverSource Energy seeing upward movement. However, not all sectors experienced gains; Vistra and Constellation Energy (NASDAQ:CEG) faced declines due to fears of lower data center demand in light of the DeepSeek news.

In the rush for safety, Treasuries rallied, pushing yields to the lowest levels of the year and benefiting interest-rate-sensitive industries, including real estate-related stocks. The automotive sector, including Ford (NYSE:F) and General Motors (NYSE:GM), and recreational vehicle manufacturers like Brunswick (NYSE:BC) and Winnebago, also saw boosts. Additionally, homebuilding stocks gained after government data revealed that the pace of new single-family home sales exceeded economists' expectations last month.

DeepSeek's AI Assistant's rise to the top-rated free application on Apple's App Store in the United States further underscores the market's reaction to the potential disruption in the tech sector. The shift towards defensive stocks may continue as investors reassess the impact of emerging technologies on established market players.

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