The Great Rotation Has Crushed Growth Stocks. History Says That's Usually When You Should Be Buying Them.

The setup is less about chasing AI beta and more about how capital intensity is re-shaping the competitive map. The firms that can self-fund compute buildouts will pull further ahead because AI monetization increasingly depends on distribution, proprietary data, and balance-sheet capacity, not just model quality. That argues for a continued relative advantage in the largest platforms while leaving lower-quality software names vulnerable to margin pressure as they are forced to spend more just to defend seat growth.

The second-order winner set likely extends beyond the headline names into power, networking, and data-center adjacency, but the best risk-adjusted expression is still the hyperscalers themselves because they control the capex purse. The market is underestimating how quickly AI usage can convert from “optional feature” to default workflow inside enterprise suites; once that happens, pricing power can re-accelerate even if headline cloud growth normalizes. The biggest loser is not another large-cap tech company today, but any software vendor with low switching costs and no infrastructure moat.

Near term, the main risk is valuation-duration compression if rates back up or if capex intensity triggers fears of lower free cash flow conversion over the next 1-2 quarters. That said, the pullback in MSFT and the still-reasonable forward multiples across the group suggest the rotation out of growth may be becoming a positioning event rather than a fundamentals event. The contrarian point: consensus is still treating AI spend as an expense line, but for the dominant platforms it is increasingly a toll road that raises user lock-in and expands the addressable wallet share.