Markets Reassessing Pace of AI Boom, T. Rowe Price's Wang Says

T. Rowe Price portfolio manager Tony Wang says the AI boom may not be over, but markets are reassessing its pace, feasibility and long-term returns. He attributes the selloff to crowded positioning, leverage and momentum-driven trading; the article provides no magnitude for the decline.

Analysis

The useful distinction is between a timing/positioning unwind and a deterioration in AI economics. Crowded, leveraged exposure can amplify downside and cross-asset volatility before earnings estimates move; if estimates remain intact, indiscriminate selling may create better entry points in firms with demonstrable AI revenue and returns on invested capital. The more durable risk is that infrastructure spending scales faster than monetizable demand: that would pressure returns across the hardware and data-center supply chain even if AI adoption continues. Avoid treating all AI-linked exposure as one trade.

Days: flows and de-grossing can dominate fundamentals, so expect elevated dispersion and gap risk. Over 1–3 months, track estimate revisions, hyperscaler capex commentary, order cancellations, and evidence that customers are converting deployments into paid usage. Over 6–18 months, the key test is whether incremental AI revenue and productivity gains justify accumulated compute and power costs. The contrarian opportunity is selective: a broad selloff may underprice durable adopters, but buying the whole theme assumes monetization that remains unverified. No company-specific valuation or earnings data is supplied, so this is a framework rather than a single-name call.

Key Decisions for Investors

• Do not add broad AI beta solely on the basis of positioning-driven weakness. Wait for stabilization in estimate revisions and capex signals; then favor exposure with observable customer monetization over suppliers whose demand depends on continued spending acceleration.
• For near-term portfolio protection, consider a small, defined-risk put spread on a broad semiconductor or growth-equity proxy rather than an outright short. Use it only if exposure is crowded in the portfolio; unwind if estimates stabilize and the proxy reclaims its pre-selloff trend. Set strikes and expiry against current volatility and event dates, which are not provided here.
• Watch for falsification of the structural-bear case: sustained upward revisions to paid AI usage or productivity-linked revenue alongside stable customer capex returns. Conversely, capex restraint, order deferrals, or weakening monetization evidence would argue that the reset is fundamental, not just technical.