WS #16118

The market is undergoing a significant rotation away from high-multiple technology stocks, driven by a structural shift in institutional positioning. Goldman Sachs reports that hedge funds are cutting tech exposure at the fastest pace in a decade, a signal that validates the recent AI chip rout and suggests the sector's recent strength was overextended. This macro headwind is compounded by specific supply-chain bottlenecks, notably Microsoft's abandonment of a UK data center project due to power constraints, which highlights the growing friction between AI capital expenditure and physical infrastructure limits. Despite this, the Nasdaq 100 managed a rebound, indicating that the selling pressure is selective rather than a broad capitulation. In the energy and geopolitical sphere, the situation remains volatile. Ukrainian drone strikes on a Russian oil terminal in St. Petersburg escalate the conflict's reach, while the previous confirmation of Houthi strikes on Saudi Aramco keeps the Strait of Hormuz risk premium elevated. However, the immediate market reaction is muted by the broader rotation into defensive assets and the specific impact of the strikes on Russian rather than global supply. Meanwhile, Amazon's decision to fund 12 small nuclear reactors marks a critical pivot for hyperscalers toward baseload power independence, directly countering the grid-constraint thesis and creating a long-term bullish case for nuclear infrastructure providers. M&A activity provided a bright spot in biotech, with Silence Therapeutics surging 126% on a $1.3 billion acquisition by Merck KGaA, signaling continued M&A appetite in the sector despite the tech selloff. In crypto, Bitcoin's proximity to the $82,000 level and Strategy's continued accumulation suggest underlying institutional demand remains intact, even as retail-facing assets like IREN and Cipher face headwinds from AI infrastructure cost concerns. The narrative is shifting from 'AI at all costs' to 'AI with reliable, independent power and manageable unit economics.'