These two sectors have been boosted by AI hopes. Why investors should buy one, and trim exposure to the other.

Ned Davis Research (NDR) says AI-driven optimism has lifted tech and hurt utilities, prompting the firm to upgrade technology to overweight and downgrade utilities to marketweight. Tech’s rebound—led by mega-caps such as Nvidia, Apple and Microsoft—has been supported by resilient earnings estimates, lower valuation multiples and improving internal breadth (semiconductors and hardware outperforming). Utilities, after a strong Q1 gain, have lost some defensive appeal as higher Treasury yields make dividend yields relatively less attractive (the sector now yields about 1.6 percentage points less than the 10-year). NDR warns market breadth is narrow, so while they’d consider a modest increase in equity allocation if breadth improves, they remain cautious about the sustainability of the rally absent wider market participation.