Despite a near 10 per cent climb in US and global stocks this year, beneath the surface lies a fundamental market reset. While Big Tech has powered gains through index-tracking investments, the familiar AI narrative is cracking. Investors are questioning whether runaway spending on untested technology will ever translate to real revenues, especially as major consumers balk at mounting costs.

Warning signs are multiplying across asset classes. SpaceX bonds face growing skepticism from investors, with Allianz's chief investment officer declaring the market has shifted into "bubble territory" from healthy boom conditions. The Bank for International Settlements echoes these concerns in its annual report, warning that AI "exuberance" could abruptly reverse. Even valuation metrics suggest extreme excess, with one brokerage finding current bubbles surpass historical US precedents by extraordinary margins.

The rotation is already underway. Magnificent Seven stocks have stumbled badly - Microsoft down nearly 20 per cent, Meta falling 11 per cent - while the Philadelphia Semiconductor Index has surged roughly 80 per cent. Emerging markets and small-cap US stocks now outperform, signaling investor preference for companies positioned to benefit from the chip revolution rather than those racing to spend on unproven AI platforms.

The old AI trade is effectively dead. Markets are pivoting toward tangible semiconductor opportunities, leaving behind the speculative frenzy that once dominated. This shift represents a more fundamental reallocation of capital than surface indices suggest.