July 17, 2026, (Inside AI) — Some investors are quietly repositioning portfolios for a slowdown in hyperscaler spending growth, betting that the near-trillion-dollar AI infrastructure boom may soon decelerate, easing pressure on Big Tech balance sheets while challenging semiconductor valuations.
The trade marks a sharp reversal from the past two years, when investors piled into chipmakers and data-center suppliers on expectations that Microsoft, Amazon, Alphabet, and Meta would keep accelerating capital expenditures. Now, UBS projects hyperscaler capex will rise 76% this year to $673 billion, but growth will slow to just 25% next year and 6% in 2028.
Active managers are cutting exposure to semiconductor stocks and rotating into the hyperscalers themselves, which have sharply lagged the chip rally. They are also buying software, financials, and healthcare stocks expected to benefit from broader AI adoption.
“Once they stop increasing their capex, it will definitely be a relief for hyperscalers and a negative signal for the semi industry,” said Alexis Bossard, global equity portfolio manager at Edmond de Rothschild Asset Management, who has already reduced semiconductor holdings he considers overpriced relative to expectations.
The Philadelphia Semiconductor Index has more than doubled over the past year, even after a nearly 18% drop from its June peak. By contrast, the equal-weighted S&P 500 rose 11%, and Europe’s AI-light STOXX 600 gained just 8%. Bank of America’s July fund manager survey found 82% viewed semiconductors as the most crowded trade, with none reporting short positions.
Bossard has increased exposure to Amazon and favors liquid cooling, cybersecurity, and select software firms. “We have a massive underexposure to semis right now,” he said.
Alberto Conca, CIO at LFG+ZEST, has sharply cut positions in memory-chip and equipment makers while building stakes in hyperscalers and healthcare stocks, backing the view with put options on selected semiconductor names.
Hyperscalers are increasingly turning to external financing after funding the initial AI buildout with their own cash. Apollo Chief Economist Torsten Slok notes that cover ratios—a measure of investor demand for bonds—have fallen to below 2 times in July from nearly 5 times in February. The Bank for International Settlements warned in June that disappointment in returns could trigger a sudden pullback in financing and turn the capex boom into a protracted bust.
“Cash flow is starting to be almost completely drained by capex,” Conca said, arguing hyperscalers will become more disciplined on spending growth.
Empirical Research highlights a growing mismatch between moderating capex growth and lofty revenue expectations for chipmakers. “Either the capex trajectory of the hyperscalers will be upgraded again, or the revenue growth pencilled in for their suppliers will have to come from elsewhere,” the firm said.
Madeleine Ronner, senior portfolio manager at DWS, expects earnings-season commentary from hyperscalers to remain supportive of further investment. “The surprise would be if it’s not like that,” she said, noting that buy-side forecasts for 2027 spending remain materially above analyst estimates. DWS has taken some profits in semiconductor stocks but remains overweight the sector, and certain funds have added industrial and electrical equipment exposure following the pullback.
Local Opposition and Data Center Moratoriums #
Growing local opposition to U.S. data centers could also stall spending growth. Empirical estimates about 70% of projects face some degree of pushback. On Tuesday, New York became the first U.S. state to halt construction of large new data centers, imposing a one-year moratorium amid concerns over power costs, water supplies, and community burdens.
Still, investor appetite for AI infrastructure remains strong. Morningstar data show chip-focused funds attracted record net inflows of $10 billion through May. Fidelity Investments’ Director of Global Macro Jurrien Timmer says demand for compute capacity is robust and recent volatility may prove to be just another shakeout.
He compared recent pullbacks to the periodic corrections seen during previous tech booms, noting that leading stocks during the late-1990s internet rally suffered repeated 20-30% declines before resuming their advance. “The AI story is well known, it’s ongoing, the earnings are still supporting the trend,” Timmer said.
Even so, he believes investors should diversify, noting that beneficiaries of AI adoption such as financials may increasingly matter alongside beneficiaries of AI construction. “I want to participate in the boom, but I also want to protect myself in case that boom is overdone,” Timmer said.