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The Great AI Stocks Rotation: Where the Smart Money Is Actually Moving

The Great AI Stocks Rotation: Where the Smart Money Is Actually Moving

April 16, 2026

The AI Investing Pulse

April 16th, 2026

In this Week’s Edition:

Analysis - The Great AI Stocks Rotation: Where the Smart Money Is Moving
Stock Ideas - Nvidia Has 74% of Its Portfolio Invested in 2 AI Stocks
News - The Hidden Menace Behind Big Tech’s AI Arms Race
Startups - OpenAI Investors Eye Anthropic as $1.2T Valuation Looms
Trends - Redefining the Future of Software Engineering
Other News - AI Trading Bots Transform Retail Trading in 2026

The Great AI Stocks Rotation: Where the Smart Money Is Actually Moving

AI money isn't disappearing, it's rotating. Software stocks have lost $2 trillion while semiconductors and physical infrastructure surge. Here's where capital is flowing in 2026.

Micron Technology is up 59.9% this year. Salesforce is down 32.8%. Both are classified as AI stocks. The gap between them tells the real story of 2026: money isn't leaving AI, it's moving from one part of the stack to another.

The Morningstar US Software Index has fallen 19.4% year to date while the broader S&P 500 sits roughly flat. Meanwhile, ASML just raised its full-year revenue guidance on the back of blockbuster Q1 earnings, and Taiwan Semiconductor posted revenue growth of up to 40% year on year. The AI trade isn't dead. It's rotating, and the destination is physical infrastructure.

The HALO Trade: From Code to Concrete

In February 2026, Josh Brown of Ritholtz Wealth Management coined a term that has since been adopted by Goldman Sachs and Morgan Stanley: HALO, or Heavy Assets, Low Obsolescence. The thesis is straightforward. As AI disrupts software business models and compresses the value of code, the physical infrastructure that AI depends on, data centres, power plants, semiconductor fabs, memory chips, becomes more valuable, not less.

Goldman Sachs Research now highlights a clear market shift from "asset-light" to "heavy asset" models, favouring companies with tangible production capacity and high barriers to entry. The logic is hard to argue with. Amazon, Alphabet, Meta and Microsoft are set to spend a combined $650 billion in capital expenditure in 2026, up 62% from 2025. That money flows directly into chips, memory, lithography equipment and power generation. It does not flow into SaaS licences.

The numbers back this up across multiple sectors. Generac, which makes power generators, is up 67% this year. Caterpillar, the machinery giant, is up 17%. Even FedEx has climbed 24%. But the clearest beneficiaries sit in the semiconductor supply chain.

The Semiconductor Winners

Three companies in the AIIP universe stand out as direct beneficiaries of the rotation into physical AI infrastructure.

Micron Technology $MU ( ▼ 2.03% )

Sector / Industry: Technology | Semiconductors, Memory
AI Stack Layer: Infrastructure (AI Memory and High-Bandwidth Memory)
Market Cap: $514bn
1 Week: +8.2% | YTD: +59.9%
Combined Score: 184.1/200
AIIP Ranking: Watchlist

The AI Thesis Micron is the purest play on the AI memory supercycle. The company has entered high-volume production of HBM4 memory chips ahead of schedule, supplying Nvidia's Vera Rubin architecture. All of its 2026 HBM supply is already committed, and pricing for the majority of that volume is locked in. When hyperscalers spend $650bn on AI infrastructure, a significant portion flows directly into high-bandwidth memory, and Micron is the primary Western supplier.

Current Picture Micron reported Q2 fiscal 2026 revenue of $23.86bn, a 196% increase year on year, with a record gross margin of 74.9%. The stock has now climbed to $456 after a sharp rally this month. At a Combined Score of 184.1, it sits comfortably in Watchlist territory with strong momentum (RS: 97.9) and top-tier fundamentals. Analyst consensus is "Strong Buy" with price targets ranging from $450 to $550.

Taiwan Semiconductor Manufacturing $TSM ( ▼ 1.26% )

Sector / Industry: Technology | Semiconductors, Manufacturing
AI Stack Layer: Infrastructure (Advanced Chip Fabrication)
Market Cap: $1.71tn
1 Week: +2.6% | YTD: +23.7%
Combined Score: 171.1/200
AIIP Ranking: Watchlist

The AI Thesis Every advanced AI chip, whether designed by Nvidia, AMD, Broadcom or Apple, is manufactured by TSMC. The company holds a near-monopoly on leading-edge fabrication at 3nm and below, making it the single most critical bottleneck in the AI supply chain. TSMC expects its AI accelerator revenue to grow at a "mid-to-high-fifties percent CAGR" through 2029. When the hyperscalers commit $650bn to AI, TSMC collects a toll on virtually every chip that spending produces.

Current Picture IDC now expects TSMC revenue to grow 25 to 30% in 2026, revised upward from 22 to 26%. Q1 revenue hit $34.6 to $35.8bn, representing up to 40% year-on-year growth. TSMC plans to spend $52 to $56bn in capex this year, a 37% increase. At a Combined Score of 171.1, it sits in Watchlist territory with strong fundamentals (86.2) and solid momentum (RS: 84.9).

ASML Holding $ASML ( ▼ 2.41% )

Sector / Industry: Technology | Semiconductor Equipment
AI Stack Layer: Infrastructure (Lithography and Chip Manufacturing Equipment)
Market Cap: $559bn
1 Week: +2.3% | YTD: +38.7%
Combined Score: 138.9/200
AIIP Ranking: Momentum

The AI Thesis ASML holds a global monopoly on extreme ultraviolet (EUV) lithography, the machines required to manufacture chips at 7nm and below. No ASML machines, no advanced AI chips. Full stop. As TSMC, Samsung and Intel expand fabrication capacity to meet AI demand, ASML is the sole supplier of the most critical equipment in the chain. In Q1 2026, 51% of ASML's new tool sales went to memory manufacturers, up from 30% the prior quarter, reflecting the surge in AI memory production.

Current Picture ASML reported Q1 net sales of €8.8bn (beating the €8.5bn estimate) and net profit of €2.8bn. The company raised its full-year guidance to €36 to €40bn, up from €34 to €39bn previously. CEO Christophe Fouquet noted customers are "accelerating capacity expansion plans for 2026 and beyond." At a Combined Score of 138.9, ASML sits in the Momentum category. The fundamentals score (51) reflects the cyclical nature of equipment orders, but momentum (RS: 87.9) is strong. China export restrictions remain a headwind, with China sales falling to 19% of revenue from 36% last quarter.

The Software Carnage: $2 Trillion and Counting

On the other side of this rotation, the damage to software stocks has been severe. The term "SaaSpocalypse" has entered Wall Street vocabulary, and the numbers justify the drama.

Salesforce is down 32.8% year to date. Adobe has fallen 30.1%. ServiceNow has dropped 38.5%. Snowflake has lost 34.1%. On 9 April alone, Cloudflare plunged 12%, Snowflake dropped 9%, and ServiceNow fell 7% in a single session. Collectively, AI agent fears have wiped roughly $2 trillion from enterprise software valuations since the start of 2026.

The core concern is structural, not cyclical. Autonomous AI agents capable of executing multi-step business workflows threaten the per-seat SaaS licensing model that underpins the entire sector. If an AI agent can handle IT service management, ticket routing and workflow automation, the value proposition of paying per human user for ServiceNow diminishes. If an AI agent can query and transform data across multiple sources natively, the case for a centralised data warehouse like Snowflake weakens.

Not everyone agrees the sell-off is rational. Some fund managers argue investors have sold the software group indiscriminately, and that companies demonstrating AI as a genuine new revenue engine, with customers paying 25 to 45% premiums for AI-enhanced tiers, could recover strongly. But for now, capital continues to flow out of software and into the physical layer.

Final Take

The rotation from software to physical infrastructure reflects a maturing market, not a failing one. In 2023 and 2024, AI enthusiasm lifted everything with an "AI" label. In 2026, the market is differentiating. Companies that build, power and equip the AI stack are being rewarded. Companies whose business models could be disrupted by AI are being repriced.

For investors tracking the AI theme, one lens worth considering is where the capex is flowing. When the hyperscalers commit $650bn to infrastructure, the beneficiaries are the companies that supply chips, memory, manufacturing equipment and power. Our scoring model reflects this, with Micron (184.1) and Taiwan Semiconductor (171.1) sitting in Watchlist territory, while software names like Adobe and Salesforce register scores well below signal thresholds.

The HALO trade may not last forever. If software companies prove they can monetise AI agents rather than be disrupted by them, the rotation could reverse. But right now, the capital flows favour atoms over bits.

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^{Not Investment Advice}^{: This content is provided by AI Investing Pulse for informational and educational purposes only. It does not constitute investment advice, a personal recommendation, or an invitation or inducement to engage in any investment activity.}^{Not Regulated}^{: AI Investing Pulse is not authorised or regulated by the Financial Conduct Authority (FCA) in the United Kingdom, is not registered with the Securities and Exchange Commission (SEC) or any state securities regulator in the United States, and is not registered with the Canadian Investment Regulatory Organization (CIRO) or any provincial securities commission in Canada.}^{Methodology Disclosure}^{: The AIIP Index scores and rankings mentioned in this article are generated by a proprietary quantitative methodology based on publicly available financial data. Our full methodology is explained in the "About AIIP" section below. These scores are objective system outputs, not recommendations or endorsements.}^{Risk Warning}^{: Investing in stocks involves risk, including the potential loss of principal. Past performance of stocks, scores, or rankings is not indicative of future results. Stock prices can decline as well as rise, and you may lose some or all of your invested capital.}^{Third-Party References}^{: References to analyst opinions, bank research, media publications, or the term "picks" refer to third-party selections, not AIIP recommendations. We aggregate this information for educational analysis only.}^{Seek Professional Advice}^{: Always consult a qualified, regulated financial professional who understands your personal circumstances before making any investment decisions. Consider your individual financial situation, risk tolerance, investment objectives, and time horizon.}

^{About AIIP -}^The^{AIIP Index}^{tracks 173 AI-focused public companies across the full AI stack, serving as our benchmark for sector performance. All scores are proprietary and calculated using data from}^{Finbox (powered by S&P Global Intelligence)}^.^{AIIP Total Score}^{(0–100) combines metrics for sales and EPS growth, financial quality, and valuation to assess overall business strength.}^{AIIP Relative Strength (RS) Score}^{measures a stock’s price performance relative to the AIIP 173 AI stocks.}^{Ranking Status}^{is based on score combinations:}^Fundamental^{: Total Score ≥ 70, RS < 80.}^Momentum^{: RS ≥ 80, Total Score < 70.}^Watchlist^{: Total Score ≥ 70 and RS ≥ 80}

TOP AI STOCKS PERFORMANCE

COMPANY	SECTOR	WEEKLY
Credo Tech (CRDO)	Technology	56.0%
Quantum Computing (QUBT)	Technology	38.6%
Bloom Energy (BE)	Technology	33.5%

TOP AI ETFs PERFORMANCE

ETFs	SECTOR	WEEKLY
iShares (ARTY)	Future AI & Tech	10.9%
Themes (WISE)	Gen AI & Tech	9.9%
Robo Global (THNQ)	Global AI	9.8%

AI Stock Ideas

Nvidia Has 74% of Its Portfolio Invested in 2 AI Stocks – The Motley Fool

Nvidia's investment portfolio is heavily concentrated: 61% in Intel and 13% in CoreWeave as of December. A revealing look at where the AI chip giant is putting its own capital.

Energy Vault (NRGV): A Leading AI Energy Stock for 2026 – Yahoo Finance

Energy Vault develops utility-scale battery, gravity and green hydrogen storage for the AI data centre buildout. The company just entered Japan via an 850 MW acquisition and now has over 1 GW under operation or construction.

3 AI Stocks That Can Outpace the S&P 500 for the Next 5 Years – The Motley Fool

Broadcom, Micron and Alphabet are highlighted as AI names with five-year outperformance potential. Micron's revenue nearly tripled YoY in fiscal Q2, while Google Cloud has become Alphabet's primary growth catalyst.

AI Stocks & ETFs News

The Hidden Menace Behind Big Tech’s AI Arms Race – Fortune

Amazon, Alphabet, Meta and Microsoft are set to spend a combined $630bn in capex in 2026, up 62% from last year's record. Moody's flags $662bn in off-balance-sheet data centre lease commitments, and none of the hyperscalers have demonstrated positive ROI at scale.

Not All AI Capex Is Created Equal: Schroders – Investor Daily

Schroders argues investors are wrong to lump all hyperscaler AI spending together. Meta's AI investment in ad targeting has delivered measurable returns, while Apple has "fumbled" its spend with little to show for it.

What Top Investors Think of the US Software Apocalypse – Morningstar

The US Software Index has plunged 19.4% YTD while the broader market sits flat. Top fund managers argue the sell-off is indiscriminate, with some seeing opportunities in names like Salesforce that have been caught up in the broader rout.

AI Startups

OpenAI Investors Eye Anthropic as $1.2T Valuation Looms – TechBuzz

Justifying OpenAI's $852bn round requires assuming an IPO at $1.2 trillion or more, making Anthropic's $380bn valuation look like the bargain. Anthropic's annualised revenue jumped from $9bn to $30bn in three months, driven largely by coding tools.

AI and Megarounds Drive VC Investment Surge in Q1 2026 – UKTN

UK startups raised £5.7bn in Q1 2026, up 60% year on year, with AI accounting for 74% of all VC raised. Twelve megarounds of $100m+ contributed $5.1bn, led by Nscale ($2bn), Wayve ($1.2bn) and ElevenLabs ($500m).

AI Trends

Redefining the Future of Software Engineering – MIT Technology Review

A survey of 300 engineering executives identifies agentic AI as the third major shift in software development, after open source and DevOps. AI agents are becoming self-directing entities that can manage entire projects autonomously, not just assist with discrete tasks.

The Agentic Workforce Arrives: AI and the HR Transformation – Financier Worldwide

Agentic AI is moving HR beyond task automation to running entire workflows, from sourcing through onboarding, with minimal prompting. The EU AI Act, fully applicable from August 2026, will be the first major regulatory framework governing these systems.

Others

AI Trading Bots Transform Retail Trading in 2026 – Let's Data Science

The algorithmic trading market is projected to reach $25bn by 2026 as AI bots evolve from rule-followers into LLM-driven agents that scan sentiment, parse research and adjust strategies in real time. The gap between institutional and retail trading technology continues to shrink.

How AI Could Shape the Next Era of Global Productivity Growth – Investment Week

AI is emerging as the next General Purpose Technology alongside the steam engine, electricity and the internet. The key question is whether AI adoption can close the productivity gap between the US and Europe.

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