Tech Sector Stalls as Rotation Rattles Growth Stocks and Puts XLK Bulls on Notice

The market’s favorite trade, that relentless, almost Pavlovian bid for tech, has finally hit a wall. For months, the narrative was simple: buy anything with a whiff of AI, close your eyes, and watch the money roll in. But as of February 5, 2026, that playbook looks like it’s been run through a shredder. XLK sits frozen at $136.35, not budging an inch, while the broader market digests a wave of sector rotation headlines and a palpable sense of exhaustion among software names. The real story isn’t just about a flat line on a chart. It’s about the tectonic shift happening beneath the surface, where growth darlings are suddenly out of favor and the so-called “dull” sectors are getting a second look.

Let’s start with the facts. Over the last 24 hours, newswires have been buzzing about a “major rotation” (Seeking Alpha, 2026-02-05) and “ultra high” skepticism around tech (YouTube, Jefferies' Brent Thill, 2026-02-05). Meanwhile, AI poster child Anthropic dropped a shiny new model, but the market yawned and punished software stocks instead (Reuters, 2026-02-05). The message from the tape is clear: the tech bid is not just tired, it’s on life support. XLK’s price action confirms it, glued to $136.35 for four consecutive prints. That’s not consolidation, that’s indecision bordering on paralysis.

Zoom out, and the context gets even more interesting. The last time tech looked this vulnerable was back in the late 2010s, when the FANG trade briefly lost its halo. But this time, the macro backdrop is even more fraught. Liquidity is draining from the system (see Bitcoin’s 45% plunge and ETF outflows), and the labor market is showing cracks, even if unemployment remains low. The rotation isn’t just about chasing value for the sake of it, it’s about survival in a market where the old leaders are suddenly laggards. Industrial stocks are seeing analyst upgrades and bullish calls for rapid sales growth (MarketWatch, 2026-02-05), while tech is stuck in the mud.

The real kicker? The AI “disruption” narrative is starting to sound like a broken record. Investors are searching for “dull, new” stocks (YouTube, Charles Schwab’s Liz Ann Sonders, 2026-02-05), which is code for “anything but tech.” The sentiment has flipped so hard that even the most die-hard growth chasers are looking for the exits. The result is a market that feels both exhausted and on edge, a dangerous combination for anyone still clinging to the old playbook.

So what’s driving this shift? Part of it is simple math. Tech valuations have stretched to the point where even the most optimistic DCF models start to look like science fiction. The other part is macro: as liquidity tightens and rate cut hopes fade, the cost of capital is no longer free. That’s a problem for growth stocks that rely on future earnings to justify today’s prices. Add in the fact that AI upgrades are no longer moving the needle, and you have a recipe for a sector-wide rethink.

Strykr Watch

Technically, XLK is at a crossroads. The $136.35 level has acted as a magnet, with neither bulls nor bears willing to make the first move. The 50-day moving average sits just below at $134.90, providing near-term support, but a break below that opens the door to a test of $132.50, the next major support zone. On the upside, resistance is stacked at $138.00, the level where previous rallies have fizzled. RSI is hovering in the low 50s, reflecting the market’s indecision. Volume has dried up, another sign that conviction is lacking on both sides. If you’re trading this tape, the message is clear: wait for a break, don’t try to anticipate it.

The risks here are obvious. If tech sentiment deteriorates further and the rotation accelerates, XLK could easily lose another 5-7% in a matter of days. Watch for any headlines around disappointing earnings, guidance cuts, or further AI fatigue. The sector is also vulnerable to any macro shocks, especially if rate cut expectations get pushed out again. On the flip side, a surprise bid for tech, driven by short covering or a sudden reversal in macro data, could spark a vicious rally. But until proven otherwise, the path of least resistance is lower.

Opportunities abound for nimble traders. If XLK breaks below $134.90, a short with a stop just above $136.50 and a target at $132.50 offers a clean setup. Conversely, a bounce off support with volume could justify a tactical long, but only with tight stops. For those looking to play the rotation, overweighting industrials or value sectors while underweighting tech is the consensus trade, but consensus trades have a way of blowing up when everyone piles in. Stay nimble, stay skeptical.

Strykr Take

This isn’t just a pause in the tech rally, it’s the beginning of a regime change. The days of easy money in growth stocks are over, at least for now. The market is telling you to respect the rotation, not fight it. If you’re still long tech, keep your stops tight and your expectations tighter. The new leaders are hiding in plain sight, and they don’t have AI in their ticker symbol.

Date published: 2026-02-05 18:30 UTC