The AI investment theme shift that has been quietly reshaping portfolios for months has now crossed a threshold: the easy phase, when every bet on silicon and servers looked like a sure thing, is done. Semiconductor shares were already 20% off their June highs before Monday’s 4% slide, and the tech sector of the S&P 500 has watched its forward price-to-earnings multiple compress from 29 to 21 over the past year. The market, in short, has stopped granting the benefit of the doubt.
Mike Santoli, CNBC’s senior markets commentator, frames the moment with a borrowed line. When Daniel Patrick Moynihan comforted a mourner after JFK’s assassination in 1963, he did not say grief would last forever. He said: ‘We’ll laugh again. It’s just that we’ll never be young again.’ The AI trade is in that second sentence now.
What the AI Investment Theme Shift Means for Portfolios
The near-term narrative has pivoted from opportunity to risk. Breathless talk of throttling the AI buildout makes it harder to defend 2027 earnings projections that rest heavily on semiconductor growth. Anyone who suspected the profit surge of the second quarter reflected pulled-forward demand rather than durable expansion will find their concern reinforced.
There is a counterpoint. The savage rotation away from high-momentum AI hardware stocks since June has drained the speculative aggression that once kept analysts nervous about bubble comparisons with the late 1990s. Monday’s resilience in the shares of Microsoft, Alphabet and Meta suggested investors see a possible capex slowdown as relief rather than ruin: these platforms can pause before committing the next wave of capital.
The more pressing beneficiary of the mood change is a corner of the market that has been gaining ground for months. The VictoryShares Free Cash Flow ETF (VFLO) has returned 32.45% year-to-date on a total-return basis, according to Yahoo Finance, outpacing the Mag 7-heavy S&P 500 over the same stretch. The fund, with net assets of approximately $10.95 billion, carries a net expense ratio of 0.39% (subject to a contractual waiver through October 2026, per Victory Capital’s fund page). Free cash flow, as the manager defines it, is net operating cash flow minus capital expenditures: the metric that separates companies generating real money from those chasing future promises.
The portfolio’s composition tells its own story about where the market is hunting for shelter. Technology still leads at 35.12% of the fund, but Energy (23.30%) and Healthcare (16.92%) fill out a roster that looks nothing like a conventional large-cap growth index, according to Morningstar’s ETF data. The top 10 holdings represent 32.7% of assets, with Salesforce the largest position at 3.84%, followed by Devon Energy at 3.60% and Adobe at 3.49%.
Bending Spoons and the IPO That Got the Forensic Treatment
Santoli also flags a sideshow that illuminates how scrutiny intensifies once the youthful AI enthusiasm fades. Bending Spoons, the Milan-based acquirer of ageing internet properties, priced its Nasdaq IPO at $29 per share in June, valuing the company at roughly $18 billion, before opening trade at $31, according to Morningstar’s IPO report. The offering raised $1.68 billion in total, though nearly 41% of that sum ($683.6 million) went to existing shareholders selling stock rather than to the company’s balance sheet.
The Wall Street Journal subsequently subjected the company to what Santoli calls an ‘old-fashioned forensic-accounting rinse,’ questioning its reliance on earnings metrics that strip out amortisation and raising doubts about customer retention figures. The financials are not straightforwardly reassuring: revenue nearly doubled to $1.31 billion in 2025 from $671.1 million in 2024, yet the company swung to a net loss of $112 million in 2025 after posting net income of $89 million the prior year. Goldman Sachs, J.P. Morgan and Allen & Company served as underwriters, according to BusinessWire’s announcement. The company’s final IPO prospectus and its SEC EDGAR filing are public. When markets are young and generous, questions about amortisation adjustments get waved through. They do not anymore.
Meanwhile, household investors remain heavily committed. Bank of America tracks the asset allocation of its wealthy private clients weekly, and equity exposures are at quarter-century highs, while bonds and cash sit near historic lows, according to the Bank of America Private Bank. The S&P 500 has drifted sideways since 1 June without ever falling more than 3% from a record high, sustained less by conviction than by relentless sector rotation. That kind of resilience has a ceiling: John Kolovos of Macro Risk Advisors notes that ‘bullish sentiment is moderating but has yet to reach contrarian extremes, despite the persistent underperformance of beta, last week’s spike in the VIX, and the growing number of stocks breaking below their 50-day moving averages.’
The echo of 1999 grows louder as 10-year Treasury yields press toward 5% and the Fed prepares to move. Whether this cycle ends with a comparable reckoning depends on how quickly AI monetisation proves itself in cash, not projections. The SpaceX IPO, pencilled in for June 2026, is the next test of whether the market’s appetite for transformative-technology stories has genuinely matured, or merely paused.
