Global Market: AI chip rally faces valuation test as investors rotate towards hyperscalers

Global semiconductor stocks face a valuation test as UBS projects hyperscaler capital expenditure growth slowing from 76% this year to 25% in 2027 and just 6% in 2028. Fund managers are rotating from chipmakers toward hyperscalers like Amazon, software firms, and sectors expected to benefit from AI adoption including financials and healthcare. Bank of America's July survey showed 82% of respondents considered semiconductors the most crowded trade in global markets, while bond cover ratios for Big Tech debt issuance have fallen below 2x in July from nearly 5x in February.