Big Phase Transition Of AI Alpha

The article argues that the AI market is shifting from hardware accumulation toward agentic-inference applications, favoring software companies with stronger capital efficiency and potential margin expansion. It rates the iShares Expanded Tech-Software Sector ETF (IGV) a strong buy relative to semiconductor ETFs SMH and SOXX, citing under-ownership and expanding adoption of agentic AI. The view implies a potential rotation in AI exposure from chip hardware toward application software.