Capital Does What AI Can't: It Picks a Side 🪨

Capital is rotating away from the Magnificent 7 and bitcoin, the strongest-performing assets of the past decade, and into the semiconductors, memory-chip producers and space-linked companies supplying the infrastructure behind the artificial intelligence boom. Microsoft (MSFT) is down 33% from its recent highs, Meta (META) has dropped 28%, and Tesla (TSLA) is off 20%. Amazon (AMZN), Nvidia (NVDA) and Alphabet (GOOGL) are all trading more than 10% below their peaks, with Apple (AAPL) the best performer of the group at -7%.

Crypto is part of the same shift. Bitcoin ($BTC), trading at $63,790.74, has slumped roughly 50% from its October all-time high, a drawdown of a scale that has dragged the largest digital asset into the same rotation narrative as mega-cap tech.

The biggest beneficiaries of the rotation sit further down the supply chain. Memory-chip maker Sandisk (SNDK) has surged roughly 800% this year, and the Global X Artificial Intelligence & Technology ETF, which focuses on memory-related companies (DRAM), is up about 140%. In microprocessors, Micron Technology (MU) has gained about 230% year to date, and the VanEck Semiconductor ETF (SMH) is up 67%.

Investor interest has also extended to SpaceX, Elon Musk's space exploration company, which is expanding into AI. Last week the company raised $75 billion in the largest IPO in history, listed under the ticker SPCX.

The rotation is being driven by the scale of capital expenditures required to fund AI buildouts. Alphabet, Amazon, Microsoft and Meta are expected to spend a combined $725 billion on capital expenditures this year, a 77% increase from last year's record level. Free cash flow is no longer fully funding those ambitions: Alphabet, Amazon and Meta collectively borrowed about $93 billion last year, accounting for roughly 6% of total corporate bond issuance.