Citrini Research Declares End of Traditional AI Trade

Citrini Research declared the end of the AI trade as previously known in its State of the Themes report released Wednesday. The research firm predicts peak capital expenditure growth, noting that annualized hyperscaler investment is approaching $1 trillion while annual recurring revenue in the AI ecosystem remains only about one-fifth of that amount.

Citrini attributes this shift to the commoditization of frontier models, citing price wars between OpenAI and Anthropic. The report also points to increased physical risks to data-center construction following the Democratic victory in the U.S. midterm elections. Consequently, the firm recommends rotating portfolios toward real-economy sectors, including energy, financials, and consumer plays.

Asian markets reacted on Thursday with a sharp divergence in performance. Semiconductor stocks in South Korea and Japan fell, with the Kospi index dropping 5% as Samsung Electronics and SK Hynix tumbled. Conversely, the Hang Seng Index rose 3.6%, led by rallies in Chinese internet and consumer stocks such as Tencent and Alibaba.