Investors Cool Despite AI Buzz as Markets Show Weak Momentum

Despite the ongoing surge in artificial intelligence (AI) interest, wider markets are showing signs of fatigue. A recent commentary on CNBC’s “Daily Open” newsletter noted that outside of the AI theme, many sectors lack clear direction and momentum.

The S&P 500 and Nasdaq continue to hover near highs, yet they remain sensitive to macro risks such as inflation, interest-rate hikes, and global trade tensions. Meanwhile, the AI-drenched “Magnificent Seven” stocks keep the market afloat, creating a contrast between tech-driven strength and broader stagnant performance.

Analysts say that valuations are stretched outside of key tech winners. Investors appear to be shifting capital into niche growth areas like AI infrastructure and cloud services while pulling back from traditional cyclical sectors such as industrials and materials.

Risk-on sentiment still exists, but it comes with more caution than earlier in the year. Portfolio managers now demand clearer earnings visibility and prefer high-quality companies backed by durable profits. The message: AI may drive the next wave, but only a few firms are positioned to capture it fully.