iShares Expanded Tech-Software Sector ETF is down 21.3% year-to-date, making it one of the worst-performing sector ETFs over the past six months. In contrast, Energy Select Sector SPDR Fund has gained 19.8% and Materials Select Sector SPDR Fund is up 14.98%, highlighting a sharp divergence between asset-light software names and capital-intensive sectors.

An AI labor-exposure metric combines task-level AI capabilities with labor-cost-to-revenue ratios to gauge vulnerability to automation. Industries with high labor costs—such as software, communication services and professional services—face elevated uncertainty around margins and may see continued selling pressure.

Sectors with tangible assets—energy, materials, industrials—benefit from higher barriers to automation and have outperformed, suggesting investor preference for physical-capital-intensive businesses. Conversely, asset-light, service-oriented industries linked to software development have lagged amid AI-driven cost-structure concerns.

The rotation raises questions about the durability of software-sector valuations as AI reshapes labor and cost dynamics. Investors will watch whether this trend reflects a short-term tactical shift or a longer-term structural realignment that could influence future ETF flows.