Artificial Intelligence Rotation Drives Portfolio Shift Away from Tech Sectors

Artificial intelligence may soon become a source of near‑term pain for the broader market as investors divest from technology stocks and move capital into other sectors. The iShares Semiconductor ETF (SOXX) has tumbled over 23 % in the past month on concerns that AI‑linked companies are borrowing heavily to fund growth initiatives. Intel and Cerebras Systems are among the hardest‑hit SOXX components, each down nearly 50 % during the same period. Meanwhile, the Dow Jones Industrial Average has risen 4.1 % and the equal‑weighted S&P 500 has gained more than 5 % over the last month. This broader outperformance normally signals a healthy rotation, but because the tech sector accounts for 37 % of the S&P 500’s total market capitalization, the reversal has a negative impact on the overall index. “Sustainability concerns around the AI infrastructure supercycle have triggered a sharp sell‑off in tech and related equities, prompting a shift into areas with limited AI exposure,” said Barclays strategist Venu Krishna. The move is evident on Thursday when Dow futures jumped 300 points, extending a 1,500‑point rally from Wednesday. Nasdaq‑100 futures, by contrast, fell 1 % as neocloud names CoreWeave and Nebius underperformed. Qualcomm shares also slipped 12 % after the chipmaker issued weaker‑than‑expected guidance. Adding to the sell‑off, Goldman Sachs traders warned that a Democratic sweep of the House and Senate in this week’s midterm elections could further pressure tech stocks. “Legislative restrictions are difficult to quantify, but rebuilding will become more costly and slower. Multiples have compressed dramatically, positions were already de‑risked, and another aggressive wave of selling followed,” they said. BTIG chief market technician Jonathan Krinsky noted that SOXX has now closed below its 200‑day moving average for four consecutive sessions. “There are opportunities on both sides of the trade, but this factor volatility will not fade quietly … broad market risk remains,” he added.

Source link