Tech’s Collapse Triggers a Value Renaissance: Why the Growth-to-Value Rotation Isn’t Over

The market’s collective obsession with AI has finally hit a wall, and the wreckage is scattered across the tech sector. Software, once the darling of every momentum chaser from London to New York, is now the market’s punchline. The S&P 500’s technology sector is down nearly 6% year-to-date, according to Seeking Alpha, while energy stocks are up a blistering 17%. The rotation out of growth and into value isn’t just a blip, it’s a full-blown regime change, and the algos are scrambling to keep up.

It’s not just the magnitude of the move that’s catching traders off guard. It’s the speed. One week ago, the narrative was that AI would eat the world and that every SaaS company was a buy on any dip. Now, the market is pricing in a future where AI cannibalizes the very companies that built the infrastructure. Barron’s called it “a monster of our own making”, and for once, the headline isn’t hyperbole. The selloff in tech has been sharp, broad, and merciless. Software and data analytics names have been absolutely torched, with some down double digits in a matter of days. The survivors are the old-school value names: energy, industrials, and anything with a whiff of pricing power.

Friday’s session saw a powerful rally in the broader market, but don’t confuse that with a return to tech leadership. The Dow Jones hit new heights, but the Nasdaq barely limped higher, weighed down by the tech wreck. The delayed jobs report and CPI data loom next week, adding another layer of uncertainty. For now, the story is rotation, out of growth, into value, and with a velocity that’s leaving even the fastest quant desks flat-footed.

This is not just a sector rotation. It’s a psychological shift. For years, traders have been conditioned to buy every tech dip. Now, they’re being forced to reckon with the possibility that the tech trade is not just crowded, but fundamentally broken. The market’s AI panic has created a massive mispricing, as Seeking Alpha points out. But the mispricing isn’t just in tech. It’s in everything that’s being left behind as money floods into value.

The macro backdrop only adds fuel to the fire. Bond yields are moving higher, as Bloomberg notes, putting even more pressure on growth stocks. The Fed is still hawkish, and the market is finally starting to believe them. Inflation is sticky, and the delayed jobs report is a wild card. In this environment, value stocks are suddenly sexy again. Energy, industrials, and materials are all catching a bid, while tech is left to pick up the pieces.

The historical parallels are hard to ignore. The last time we saw a rotation this violent was in the aftermath of the dot-com bust. Back then, value outperformed growth for years, not weeks. The market is starting to price in a similar scenario. The question now is whether this is the start of a new regime or just another head fake.

Strykr Watch

Technically, the rotation is just getting started. Energy stocks are breaking out to new highs, while tech is struggling to find a floor. The S&P 500’s value index is outperforming growth by the widest margin in over a decade. Moving averages are rolling over in tech, while value names are seeing bullish crossovers. RSI readings in energy and industrials are approaching overbought territory, but momentum remains strong. Support for tech is thin, with the next major level still a ways down. The algos are watching these levels closely, and any break could trigger another wave of selling.

The risks are obvious. If the jobs report or CPI data surprise to the upside, bond yields could spike and trigger another leg down in tech. A Fed hawkish surprise is always lurking. But the bigger risk is that traders are underestimating the staying power of this rotation. The market is not just rotating, it’s repricing the entire growth/value paradigm.

For traders, the opportunity is clear. Long value, short growth. Buy energy and industrials on dips, with tight stops. Fade any tech rallies until the dust settles. The risk/reward is skewed in favor of value, at least for now. Watch for confirmation in the data, but don’t wait for the all-clear. The rotation is happening in real time, and the window is closing fast.

Strykr Take

This is not a drill. The growth-to-value rotation is real, and it’s not over. The market is finally waking up to the risks in tech, and the smart money is moving fast. Don’t get caught on the wrong side of this trade. Value is back, and it’s not going away anytime soon.