The market shifts focus: capital moves from AI to finance and industry
We are witnessing a fundamental shift in the structure of market leadership. Contrary to the dominant narrative of the unchallenged dominance of artificial intelligence, macroeconomic indicators suggest that capital is beginning to flow into other sectors. This is not another speculative surge, but the start of a sustained rotation.
A key signal is the performance of the S&P 500 Equal Weight Index, which has started to narrow the gap with its market-cap-weighted counterpart. This is the first sign that "leadership is expanding beyond a handful of mega-cap companies," as I previously anticipated. The market is no longer fixated on just a few AI giants.
Signs of a Broadening Market Front
Data confirms this: the Vanguard Extended Market ETF, which tracks small- and mid-cap stocks, is strengthening alongside value stocks. The rise of the iShares Russell 2000 Value ETF since the start of the year is particularly telling. This is no coincidence—the rally involves not only the usual favorites in the growth sector but also a much wider range of issuers.
The sector picture also appears cohesive. The financial sector is approaching its 200-day moving average, industrial companies have already broken through resistance, and biotech is emerging from a prolonged consolidation phase. All of these are cyclical manifestations of improving expectations for the real economy, where capital is beginning to look beyond the mega-cap companies in the AI industry.
Chipmaker Fatigue and Rebalancing
Meanwhile, the momentum in the semiconductor sector, which was the primary beneficiary of the AI boom, is starting to show early signs of fatigue. Parabolic moves, including in chips, should correct. This is a natural process. Moreover, the quarterly index rebalancing at the end of the period could amplify this shift.
My conclusion: the market is not one-dimensional. Succumbing to the common belief that AI is the only theme means overlooking a larger and healthier process of capital rotation. Investors should pay attention to cyclical sectors and value stocks, which are just beginning their path to leadership.