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AI Trade Fractures as Investors Turn Selective

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The global artificial intelligence trade is splintering as investors grow more selective, weighing soaring capital spending, rising debt and uncertainty over who will ultimately profit from the technology. After an initial surge that lifted nearly all AI-linked assets, markets are now drawing sharper distinctions across stocks, sectors and regions.

One clear divide has opened between hardware “picks and shovels” and software firms. Shares of enterprise software and data companies such as ServiceNow and Salesforce have fallen sharply, while chipmakers and data-centre suppliers have proved more resilient. Strategists say investors are increasingly differentiating between companies that enable AI and those whose business models could be disrupted by it.

The famed “Magnificent Seven” are also no longer moving in lockstep. Heavy spending announcements by Microsoft, Meta Platforms, Alphabet and Amazon have triggered mixed share price reactions, as markets focus less on scale and more on returns. Fund managers warn that spending without clear payoff is no longer rewarded.

Regionally, South Korea has emerged as a standout winner as investors pile into memory-chip makers tied to AI infrastructure. The rally in Samsung Electronics and SK Hynix reflects growing conviction that memory demand will be a critical bottleneck in AI expansion. Together, these trends suggest the AI trade is evolving from a broad theme into a far more discriminating market.

US software stocks slide as AI disruption fears intensify

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U.S. software stocks fell sharply on Thursday as disappointing outlooks from major players deepened investor concerns that traditional software providers are being overtaken by artificial intelligence-driven competitors. Weak sentiment was triggered after Germany-based SAP issued an underwhelming cloud outlook, while ServiceNow shares dropped despite forecasting stronger subscription revenue.

Investors are increasingly worried that advances in AI, including the rapid and low-cost generation of software code and applications, could undermine the subscription-based software-as-a-service business model. Several high-profile U.S. firms saw steep losses, including Salesforce, Adobe, and Datadog, as the sell-off spread across the sector.

The pressure was compounded by concerns over heavy AI spending. Microsoft reported record AI investment alongside slower cloud growth, sending its shares sharply lower. Analysts said markets are pricing in a worst-case scenario in which AI fundamentally reshapes the software industry faster than incumbents can adapt.

Software stocks were among the biggest decliners on the Nasdaq, while chipmakers and memory firms continued to benefit from AI-driven demand, highlighting a widening divide between hardware and software winners in the AI race.

Exclusive: Palantir Inks HD Hyundai Deal Worth Hundreds of Millions, CEO Bullish on Korea

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U.S. data analytics firm Palantir has signed an expanded software agreement with South Korea’s HD Hyundai, a deal worth hundreds of millions of dollars over several years, according to a person familiar with the matter.

The agreement deepens a partnership that began in 2021 and strengthens Palantir’s presence in heavy industry in South Korea. The companies held a signing ceremony during the World Economic Forum in Davos, where Palantir set up temporary offices. While Palantir declined to disclose financial terms, the deal broadens earlier collaboration into an enterprise-wide arrangement.

Palantir’s software integrates data from across operations and uses automation and artificial intelligence to guide decision-making. With HD Hyundai, the technology has been applied to shipbuilding, construction equipment and energy-related operations. The companies have said HD Hyundai is now building ships around 30% faster by using Palantir tools to better manage materials, machinery, planning and schedules.

Palantir chief executive Alex Karp said he is “very bullish” on South Korea, calling it an innovative and dynamic market. He added that while Palantir remains primarily focused on the United States, Korea stands out as a key international opportunity as global demand for the company’s software continues to grow.