Insurers, banks and energy shares lift the UK benchmark while software stocks retreat on renewed AI jitters

The UK’s FTSE 100 ended the session at a record high, defying a shaky day for European equities as technology shares sold off amid fresh nerves about artificial intelligence-related spending and returns. The contrast highlighted a familiar split in regional market leadership: while growth and software names stumbled, London’s old‑economy heavyweights attracted buyers looking for steadier earnings and dividends.

Across major European bourses, software and other AI-exposed stocks came under pressure as investors questioned whether near-term revenues can justify stretched valuations after a strong run. Traders cited a combination of profit-taking, cautious corporate guidance and a broader “risk-off” tone that has periodically returned as investors weigh the outlook for growth, rates and geopolitics.

In the UK, the market’s sector mix helped it hold up. The FTSE 100 has comparatively less exposure to high‑multiple technology companies and a larger share of insurers, banks, energy groups, miners and consumer staples. Those areas proved resilient as money rotated into defensive and cyclical stocks, a shift that has gathered momentum whenever volatility has resurfaced.

Insurance shares were among the day’s standouts, supported by expectations of disciplined underwriting and the ability to reprice policies in line with costs. Market participants said the sector is increasingly viewed as a beneficiary of “higher-for-longer” interest rates because investment income can improve even as firms maintain conservative balance sheets. Several large insurers also remain popular with income-focused funds for their dividends and capital-return plans.

Banks and other financials added to the index’s lift as investors continued to favour businesses with relatively predictable cash generation. While the outlook for consumer demand remains mixed, investors have shown renewed interest in companies perceived as better equipped to manage a slower economy, higher funding costs and uneven credit conditions.

Energy and other traditional sectors provided further support. Oil and gas producers have benefited from years of capital discipline and a focus on shareholder payouts, leaving them better positioned to weather price swings than in past cycles. Meanwhile, select industrials and consumer staples names drew attention as portfolio managers looked for defensiveness without abandoning exposure to economic activity.

The day’s moves fit a broader pattern. After a period in which technology led global equity gains, investors have been reassessing risk concentrations and trimming exposure to the most crowded trades. The pullback in software stocks, traders said, was less a verdict on AI’s long-term potential than a reminder that adoption curves and profit timelines can be uneven. Where earlier enthusiasm priced in rapid monetisation, the market is now demanding clearer evidence of durable margins and repeatable revenues.

That shift has rippled through Europe’s tech-heavy corners, where even established firms with solid order books saw selling. Investors pointed to intense competition, the cost of talent and computing infrastructure, and uncertainty about customer budgets. In some cases, management teams have emphasised continued investment to stay competitive—an approach that can weigh on near-term profitability even when demand appears healthy.

London’s record close therefore carried a specific message: in a market more focused on earnings certainty than narrative, the FTSE 100’s global, diversified constituents can look like a safe harbour. Many of its biggest companies earn a large share of revenues overseas, which can cushion domestic uncertainty and offer exposure to global demand without the valuation sensitivity that often comes with fast-growing tech names.

International flows also played a role, according to market participants. UK equities have been attracting attention from global investors seeking diversification and relatively modest valuations compared with some peers. The FTSE 100’s dividend profile—supported by large, mature businesses—has added to the appeal for funds looking to balance growth exposure with income.

Still, traders cautioned against reading the record high as an all-clear signal. The advance looked measured, with signs that investors remain selective rather than broadly bullish. Many fund managers are maintaining some exposure to long-term growth themes, including AI, but doing so alongside a larger allocation to defensives and cyclicals that may perform better if the economy slows or if financing conditions stay tight.

The next set of corporate earnings updates will be crucial to testing the durability of this rotation. Investors will be watching for evidence that businesses can protect margins, manage costs and sustain demand while navigating a shifting policy backdrop. Any improvement in guidance from software companies could stabilise sentiment in the tech space, while disappointing results may extend the sell-off and reinforce the move toward more traditional sectors.

For now, the UK benchmark’s latest milestone underscores how quickly leadership can change. On a day when Europe’s tech story lost momentum, London’s insurers and other blue chips reminded investors that in unsettled markets, resilience and cash returns can matter as much as high-growth promise.