Fund Managers Cut AI Chip Bets as Cloud Capex Growth Slows; UBS Forecasts Deceleration to 6% by 2028

According to Bank of America's July fund manager survey, 82% of respondents view semiconductors as the market's most crowded trade. Amid this, portfolio managers are reducing chip holdings and rotating into cloud giants like Amazon and Microsoft, as well as software and financial sector stocks.

UBS forecasts hyperscale cloud operators' capital expenditure will grow 76% to $673 billion this year, but growth will decelerate to 25% in 2027 and just 6% in 2028. The Philadelphia Semiconductor Index has fallen nearly 18% from June highs despite rising over 100% year-to-date. New York became the first U.S. state this week to impose a one-year moratorium on large new data center construction, citing electricity and water concerns. Separately, bond oversubscription ratios for major tech issuances dropped from nearly 5x in February to below 2x in July, according to Apollo's chief economist.