Mounting AI costs and weaker performance are driving investors toward AI infrastructure

The biggest winners from the rotation have been memory and semiconductor stocks. Memory-chip maker Sandisk (SNDK) has surged roughly 800% this year and the Global X Artificial Intelligence & Technology ETF, which focuses on memory-related companies (DRAM), is up about 140%. In microprocessors, Micron Technology (MU) has gained about 230% this year, and the VanEck Semiconductor ETF (SMH) 67%.

The investments highlight a growing preference for the companies supplying the infrastructure behind the AI boom rather than the hyperscalers funding it.

In addition, capital has been attracted SpaceX (SPCX), Elon Musk’s space exploration company that is also expanding into AI. Last week, the company raised $75 billion in the largest IPO in history.

While AI has become the market’s dominant investment theme, the cash required to feed the growth is rising even faster. Google parent Alphabet (GOOGL), Amazon, Microsoft and Meta are expected to spend a combined $725 billion on capital expenditures this year, a 77% increase from last year’s record level.

Free cash flow is no longer fully funding these ambitions. Alphabet, Amazon and Meta, collectively borrowed some $93 billion last year, accounting for roughly 6% of total corporate bond issuance.

Another source of support is also fading. Share repurchases have fallen 33% to $132 billion in 2025, reducing a key pillar of demand for these stocks.