Technology Sector Fund Rotation: AI Hardware Cool Down, Cloud Computing Rises
The US stock market showed clear sector rotation on September 25th, with increased capital flow within the technology sector. Stocks related to AI hardware faced broad pressure, while the cloud computing and software services sectors attracted capital. This structural change reflects the market's reassessment of the investment logic in the AI supply chain and signals new investment opportunities within the technology stocks.
Market Logic Behind the Cool Down in the AI Hardware Sector
In the overnight US stock market, the AI hardware sector faced widespread pressure, with stock prices of chip manufacturers such as Nvidia (NVDA) and AMD (AMD) declining to varying degrees. This phenomenon is not accidental but stems from the market's reassessment of the AI hardware investment logic. Looking at the capital flow, the AI hardware sector experienced net outflows for three consecutive trading days, with the cumulative outflow exceeding $5 billion.
Analysts point to three main reasons for the cool down in the AI hardware sector: First, the market is concerned about the potential oversupply of AI chip capacity, as major cloud service providers are slowing down their procurement pace for high-end AI chips. Second, several investment banks recently lowered their ratings on AI hardware stocks, believing that current valuations already reflect future growth expectations. Finally, as the cost of AI model training decreases, expectations for inference chips are rising, while the growth rate expectations for training chips have slowed down.
It is noteworthy that despite the overall pressure on the AI hardware sector, there are still structural opportunities in specific sub-sectors. Manufacturers focusing on edge computing and low-power AI chips showed relative resilience, indicating the market's recognition of the diversification of AI application scenarios. Meanwhile, AI software and service providers such as Microsoft (MSFT) and Google (GOOGL) attracted continuous capital inflow, reflecting market confidence in the commercialization and monetization capabilities of AI.
Cloud Computing Sector Movement: Capital Reallocation
In contrast to AI hardware, the cloud computing sector showed strong performance on September 25th, with major cloud giants like Amazon (AMZN) and Microsoft (MSFT) stock prices rising against the trend, with the sector's overall gain exceeding 2%. Looking at the capital flow, the cloud computing sector saw a net inflow of $3.5 billion on that day, becoming the sub-sector with the highest capital inflow in the technology sector.
The strong performance of the cloud computing sector was driven by three factors: First, the demand for enterprise digital transformation continues to be released, with companies increasingly opting for cloud services to reduce IT costs amid increasing global economic uncertainty. Second, the latest earnings reports from several cloud giants showed that their cloud businesses are growing above expectations, particularly Microsoft Azure, which has maintained a growth rate of over 30% in its Azure business for several consecutive quarters. Finally, the market expects the Federal Reserve to potentially begin cutting interest rates in the fourth quarter of 2026, which will lower financing costs for cloud companies and enhance their profitability.
Looking at a longer term perspective, the strength of the cloud computing sector reflects a shift in market logic for technology investment. As AI technology moves from the laboratory to commercial applications, the market assigns a higher valuation to cloud companies that can provide AI infrastructure and services. This trend is expected to continue for the next few quarters, providing support for the cloud computing sector.
Semiconductor Sector Differentiation: Storage Chips Lead the Rally
In the technology sector, the semiconductor segment shows a clear divergence in trends. Although stocks related to AI chips are generally under pressure, the memory chip sector has performed brilliantly, with stock price gains exceeding 3% for memory chip manufacturers such as Micron Technology (MU) and Western Digital (WDC). This divergence reflects the market's differentiated expectations across various sub-segments of the semiconductor industry. The strong performance of the memory chip sector is mainly driven by three factors: First, the acceleration of global data center construction is continuously increasing demand for high-performance memory chips. Second, the popularization of artificial intelligence applications has boosted demand for High Bandwidth Memory (HBM), and the growth in the HBM market primarily benefits memory chip manufacturers. Finally, several memory chip manufacturers recently raised their earnings expectations for fiscal year 2026, indicating a sustained recovery in industry sentiment. However, the overall performance of the semiconductor sector is still constrained by the macroeconomic environment. The market is concerned that a slowdown in global economic growth could affect demand in the semiconductor industry, especially in the consumer electronics sector. This concern makes the overall semiconductor sector relatively weak, unable to support the overall trend of the technology sector. ### Evening Market Performance of Chinese Stocks: New Energy Vehicles Resist Trends and Attract Capital In the US stock market, Chinese stocks show divergence, but the new energy vehicle sector has performed strongly against the trend, with stock price gains exceeding 4% for new energy vehicle manufacturers such as NIO, XPEV, and Li Auto. This performance contrasts sharply with the trend in new energy vehicles in the A-share market, revealing different views among international investors regarding China's new energy vehicle industry. The strong performance of the Chinese new energy vehicle sector is mainly driven by three factors: First, the latest sales data released by several new energy vehicle manufacturers shows significant year-on-year growth in deliveries for August, indicating strong demand in the Chinese new energy vehicle market. Second, demand for Chinese new energy vehicles in the European market continues to increase, with export data showing strong performance. Finally, the market expects the Chinese government to introduce further policies supporting the new energy vehicle industry, which will help enhance the profitability of related companies. In contrast to the new energy vehicle sector, the overall performance of Chinese technology stocks is weak, with e-commerce giants like Alibaba (BABA) and JD appearing to decline. This trend reflects a changing valuation logic among international investors for Chinese technology companies, who are increasingly focusing on companies that can achieve profitability and have a clear business model. ### New Capital Game Landscape: Defensive Technology Stocks Are Favored Looking at overall market capital flow, the US stock market on September 25 showed clear defensive characteristics. Capital is flowing out of high-risk AI hardware sectors and into defensive technology stocks with stable cash flow and higher dividend payouts, such as Microsoft (MSFT) and Apple (AAPL). This shift in capital flow reflects market concerns about the global economic outlook and a decrease in investor risk appetite. The strong performance of defensive technology stocks is mainly supported by three factors: First, these companies usually possess strong brand moats and stable cash flow, enabling them to withstand economic downturn pressure. Second, with expectations for lower interest rates in the US, the attractiveness of high-dividend stocks increases. Finally, the valuations of these companies are relatively reasonable, without obvious bubble risks, attracting the attention of stable investors. However, the strength of defensive technology stocks does not mean the technology sector as a whole will enter a bear market. Instead, this capital rotation provides opportunities for structural adjustments within the technology sector. Investors should focus on sub-sectors with long-term growth potential and reasonable valuations, such as cloud computing, enterprise software, and cybersecurity, as these areas may receive sustained favor from capital in the coming quarters. ### APAC Market Opening Sentiment Forecast Based on the performance of the overnight US stock market, the APAC market opening on September 26 is expected to show divergent trends. The technology sector will continue its pattern of capital rotation, with AI hardware-related stocks potentially under pressure, while the cloud computing and software services sectors are expected to receive capital favor. Meanwhile, the new energy vehicle sector may show relative resilience, supported by the strong performance of new energy vehicles overnight. From an overall market sentiment perspective, the APAC market may face some adjustment pressure. On one hand, the overall weak performance of the overnight US market, with both the Dow Jones and S&P 500 indexes declining, weighs on APAC market sentiment. On the other hand, concerns about the global economic outlook still exist, which may lead to a decrease in investor risk appetite, favoring defensive allocations. However, there are also positive factors in the APAC market. First, policies from the Chinese government and central bank may emerge to further support the economy, which will boost market confidence. Second, the new energy vehicle industry chain in the APAC region has strong competitiveness and is expected to gain a larger share in the global market. Finally, with the widespread application of AI technology, the development of cloud computing and data center construction in the APAC region is expected to accelerate, providing growth drivers for related companies. ### Investment Strategy Recommendations Based on the performance of the overnight US stock market and changes in capital flows, investors should consider the following strategies: First, appropriately reduce the allocation ratio of AI hardware-related stocks and focus on sub-sectors with differentiated competitive advantages. Second, increase the allocation ratio for the cloud computing and software services sectors, as these areas may receive sustained capital favor in the coming quarters. Third, focus on investment opportunities in the new energy vehicle industry chain, especially companies with core technological advantages. Finally, appropriately allocate defensive technology stocks to cope with potential market volatility risks. Looking at a longer term, the investment logic for the technology sector is changing, shifting from purely pursuing high growth to focusing on profitability and cash flow. Investors should focus on companies that can achieve sustainable growth and have a clear business model, rather than blindly chasing hot concepts. Meanwhile, with the widespread application of AI technology, new investment opportunities will constantly emerge within the technology sector, requiring investors to maintain keen market intuition and adjust their portfolios in a timely manner. In summary, the capital rotation in the US technology sector on September 25 reflects a reassessment of the investment logic for technology stocks by the market. Investors should closely monitor changes in capital flows, adjust investment strategies promptly, and seize structural opportunities within the technology sector. Simultaneously, attention should be paid to changes in the macroeconomic environment and policy trends, as these factors can significantly influence the future trend of the technology sector.