State Street Says It’s ‘Too Soon to Count Out AI’ as Tech Momentum Powers On

State Street is doubling down on its optimism toward artificial intelligence investments, even after the Nasdaq suffered its steepest weekly decline since April.

Chief Business Officer Anna Paglia said momentum-driven tech stocks continue to show strength as investors remain captivated by the transformative potential of AI.

“How could anyone not want exposure to the growth of AI?” Paglia said earlier this week, noting that the long-anticipated shift from growth to value stocks “hasn’t materialized yet because momentum remains strong.” She added that a meaningful rotation may only occur once the market shows signs of cooling.

Paglia, a 25-year veteran of the exchange-traded funds (ETF) industry, expects diversification to take center stage early next year but maintains that AI-related investments still offer substantial upside potential.

State Street manages several ETFs tied to technology, including the SPDR NYSE Technology ETF, which has gained 38% year to date. However, the fund dipped more than 4% last week as traders booked profits in AI-heavy names such as Palantir Technologies, which saw its stock fall 11% after an earnings miss.

Despite the pullback, Paglia reaffirmed her bullish outlook on the tech sector, emphasizing that AI remains a long-term growth driver rather than a short-lived trend.

Meanwhile, Todd Rosenbluth, head of research at another investment firm, noted that market sentiment may be slowly rotating toward defensive sectors such as health care. “The Health Care Select Sector SPDR Fund has started to regain favor since October,” he said, adding that investors may see it as a way to diversify away from overheated tech plays.

The health-care fund, which had lagged the tech sector for much of the year, is now up 5% since Oct. 1 and recently ranked as the second-best performing S&P 500 sector of the week.