Wall Street Rotates AI Trade Amid Slowdown Debate

Wall Street investors triggered a significant market rotation on September 15, 2026, shifting focus from chip manufacturers to AI software and physical infrastructure. The iShares Expanded Tech-Software Sector ETF rose approximately 5%, while the iShares Semiconductor ETF fell nearly 6%, marking the strongest relative performance for software against semiconductors in roughly 25 years.

This volatility followed calls from industry leaders, including Anthropic CEO Dario Amodei and OpenAI, to slow the development of frontier AI. In response, Donald Trump dismissed these concerns as a "hoax" and a "scam" via social media and in a call with Nvidia CEO Jensen Huang, arguing that the backlash stems from American global leadership. Meanwhile, Microsoft published a provisional code of conduct to restrict future AI models.

Financial analysts provided diverging views on the impact. Bernstein and Saxo Bank argued that a slower development pace would not necessarily reduce spending, as demand for AI compute is increasingly driven by inference. Conversely, RBC Capital Markets warned that deferred adoption could create opportunity costs for software companies.

Investors are now expanding the AI trade to include the surrounding infrastructure and power systems. Physical constraints, such as power transformer lead times of 36 to 42 months, have become critical. This shift is evident in the growth of non-semiconductor firms; Powell Industries saw new orders rise 158% to $934 million, and Babcock & Wilcox Enterprises reported a backlog increase of 533% to $2.6 billion, driven by AI data center projects.