The article attributes the breakdown of the AI trade to three forces: midterm elections that could reduce data center projects, controversies surrounding Nvidia and AI industry leaders, and deteriorating investor confidence in the sector’s financial health. Falling interest rates are encouraging a rotation into food, pharmaceuticals, biotechnology and consumer goods, without eliminating the long-term potential of data centers. The author nevertheless expects data centers to keep being built, while their projected scale could be revised downward, and views Amazon as the strongest company in the digital infrastructure group. Quarterly results remain largely excellent, but the market has become vulnerable to the election cycle, a potential surge in oil prices and corporate transactions such as Marvell Technology’s proposed acquisition of Lumentum.
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