Mike Santoli argues that the AI-driven bull market almost certainly requires tech stocks to recover after several weeks of rotation into defensive, high-quality shares. The Nasdaq 100 remains nearly 11% below its record high and close to its 200-day moving average, while the Philadelphia Semiconductor Index fell 3.8%, showing that the theme has yet to establish a durable rebound. AI-related stocks still account for roughly 45% of the S&P 500, and lower valuations and reduced investor positioning have reduced valuation risk without ensuring an imminent recovery. The concentration of capital flows in mega-cap stocks means that the equal-weighted S&P 500 must continue outperforming the capitalization-weighted index for the broader bull market to remain intact.
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