Massive market rotation raises question: Is the sell-AI trade here to stay?

Investing.com reports that tech stocks experienced a significant rotation into hyperscalers on Wednesday, as a Democratic election win introduced new regulatory friction and tighter permitting rules. The sectors most impacted were semiconductors and data center infrastructure, which saw declines. Amazon, Microsoft, Alphabet, and Meta all posted gains of 6.1%, 6.7%, 3.2%, and 1.4% respectively.

Goldman Sachs noted that both long-only funds and hedge funds are participating in the shift towards hyperscalers. The company's traders argued that existing, power-secured compute infrastructure could become more valuable due to tighter permitting, water, and power rules. Sustained AI growth depends on falling compute costs, and if regulatory friction permanently raises the cost of new compute, the AI investment thesis could be called into question.