The managers’ readiness to buy the dip helps explain why Monday’s rebound came so quickly. It also suggests dips in AI names will keep drawing buyers unless state-level curbs on data centres turn out to be more than marginal. Falling bond yields during the selloff point to easier financial conditions, which supports equities overall rather than just the crowded mega-cap trade. The call to diversify implies money moving toward small caps, emerging markets, infrastructure and shorter-duration credit, so leadership could broaden even if headline tech indices recover. Texas data centre policy is the main risk to that view.
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Earlier:
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Wealth managers see last week’s AI rout as a shakeout of crowded positions, not the end of the AI cycle, and their advice is to spread the bets.
Summary:
- Wealth managers broadly remain constructive on equities after Thursday’s selloff, seeing a reset in crowded AI positioning rather than a lasting downturn
- The S&P 500 fell 4.4% and the Nasdaq 5.5% on Thursday, with the Philadelphia Semiconductor Index down about 12% and around 38% below its June level
- Some managers see the federal political risk as overstated, with state curbs such as those in Texas the more tangible threat to data centre growth
- Falling bond yields were read as a sign of contained inflation and slower but sustainable growth, not recession
- Diversification is the common advice: small caps, emerging markets, infrastructure, asset-backed securities and shorter-duration credit
- The views were gathered before Monday’s rebound in US stocks
Wealth managers are largely sticking with a constructive view on equities after last Thursday’s sharp selloff in US technology stocks. They argue that the slide reflected a reset in crowded positioning rather than a break in the AI investment cycle. Their common message is that investors should diversify rather than retreat. The views were gathered before Monday’s rebound in US stocks.
The selloff was triggered by concerns that Democratic gains in the US midterm elections could bring tighter regulation of AI and new limits on data centre construction, slowing the infrastructure build-out. It reversed an initial post-election rally. The S&P 500 fell 4.4% and the Nasdaq 5.5% on Thursday. The Philadelphia Semiconductor Index dropped about 12%, taking its decline since June to around 38%. The pressure carried into Friday, with tech-heavy North Asian markets leading losses.
Several managers see the political risk as overstated. One noted that AI still has bipartisan support as a strategic priority and that any federal restrictions would face a presidential veto. In that view, the more concrete threat comes from states such as Texas curbing new data centre projects. That would slow development at the margin without halting it.
Others pointed to signals from bond markets. Yields have kept falling through the equity selloff. One manager read that as evidence that inflation fears remain contained and that the bond market is pricing slower but sustainable growth, not recession. That firm described corrections of this size as opportunities to add exposure and said it had already rebalanced.
Diversification was the dominant theme. Advisers highlighted global small caps, emerging markets, infrastructure, asset-backed securities and shorter-duration credit as areas that either held up better or offer different return drivers. One investment chief said his firm had been moving underweight US mega-cap technology through the year in favour of an equal-weighted index. He argued there is no tech bubble to burst, just a broadening of returns to other stocks.
In Asia, analysts expect near-term volatility as markets weigh possible delays to US data centre construction. Over time, they argue, compute capacity can shift abroad, potentially benefiting Asian supply chains, while China builds out its own AI ecosystem. Some see the selling as having pushed quality stocks below what their fundamentals justify, creating value for active investors.
One manager added some perspective: this is roughly the fifth sharp fall in AI-linked stocks in the past 12 months, and the sector has recovered each time. Monday’s bounce will be an early test of whether that pattern holds.
This article was written by Eamonn Sheridan at investinglive.com.