Financials Surge Amid AI Trade Woes

While investors are panicking about the AI trade and technology sector, financials have recently hit record highs. The Financial Select Sector SPDR Fund (XLF) reached a fresh all-time high of $57.60 before easing back into the mid-$50s.

In the past month, as semiconductor stocks and the broader AI complex corrected hard, financials stocks have gained close to 5.5%. This relative strength is exactly the kind of rotation worth paying attention to.

The outperformance experienced in recent days and weeks is not random. Q2 earnings season delivered blowout results across big banks like JPMorgan (JPM), Bank of America (BAC), and Goldman Sachs (GS), which all beat estimates. Wall Street's investment banks have been riding a wave of IPOs and megadeals, and the AI buildout itself has become a fee machine for the banks financing it.

Several reports have framed the group as overlooked beneficiaries of the AI trade. Two heavyweights stand out for their recent relative strength and results: JPMorgan and Bank of America.