Observed Signal · Feb 23, 2026 · Other · Source: Trending Topics · Impact: 1/5 · Sentiment: Neutral
AI Investment Shift: Capital Moves from Software to Physical Assets
In a guest article, T. Rowe Price portfolio specialist Jennifer Martin describes a market regime change driven by AI investments. Capital is rotating from asset-light software companies to physical asset-heavy sectors like industrials, energy, and semiconductors. The AI investment cycle benefits suppliers, while hyperscalers face capital intensity pressures, with some moving toward negative free cash flow. The S&P Software Index is in a persistent downtrend, while the PHLX Semiconductor Index outperforms. The article suggests this trend may persist until inflation expectations drop significantly or asset-light valuations capitulate. Investors are favoring companies with tangible assets and pricing power, reflecting skepticism about AI monetization at the platform level.
General AI investment commentary; indirect relevance to AdTech.
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Key Takeaways & Evidence Grounding
- T. Rowe Price believes global equities are undergoing an AI-driven regime change.
- Capital is moving towards companies with physical assets and pricing power.
- The PHLX Semiconductor Index is near its all-time high relative to the S&P 500.
- Capital-intensive sectors show about 25% higher frequency of stocks at relative highs than asset-light sectors.
- The S&P Software Index is in a persistent downtrend.
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