Stock returns moderated this year across many key AI industry sectors. Hyperscaler and software returns have moderated sharply. Semiconductors, hardware, and power still show strong performance but have also moderated to some degree. Earnings remain strong, except in the power sector. Sustained earnings have required more capex which has cut into free cash flow for the hyperscalers. If they cannot scale as fast as expected, it will spill over to the other AI sectors. The best returns may have passed in this industry, yet that does not mean we are in for a reversal; nevertheless, moderation is not what many investors expect.
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