Sector Rotation From AI Hardware Into Software and China Internet
Broader market can grind higher while AI infrastructure enters healthy distribution after outsized gains.
The S&P 500 still has room to fill its upside gap as the bull trend grinds higher, but AI infrastructure names face increasingly limited upside after extraordinary gains and are entering a healthy distribution phase. Capital is better allocated away from chasing semiconductors post-blockbuster earnings and toward ongoing rotation beneficiaries.
Rotation into Chinese internet and oversold software offers better risk-reward than chasing semis.
After blockbuster semiconductor earnings, upside is becoming more limited in AI-linked hardware. Capital is rotating into Chinese internet equities and selectively oversold software names. IGV reclaiming key resistance, alongside inflation trends and geopolitical risk, will help confirm whether this rotation can extend into the market's next major leg.
| Instrument | Side | Target | Reason |
|---|---|---|---|
| IGV | Long | Oversold software names can lead the next leg if the software ETF reclaims key resistance, signaling broader risk appetite rotating out of AI hardware. |
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