The current pullback in U.S. equities reflects a rotation rather than a broad risk-off event.

The underperformance of the Nasdaq signals valuation sensitivity within AI-linked names, especially those that have rallied aggressively on forward-looking narratives. Broadcom and Oracle are being repriced not on earnings failure, but on expectations discipline. Markets are reassessing capex intensity, margin visibility, and the timing of AI monetisation rather than abandoning the theme outright.

Broadcom’s three-day decline, its sharpest since 2020, highlights how crowded positioning and elevated expectations can amplify downside when guidance lacks incremental upside. Oracle’s weakness reinforces similar concerns around cash flow strain and execution risk amid heavy investment cycles.

Importantly, this does not resemble a systemic tech unwind. Defensive sectors are holding, financial conditions remain orderly, and there is no sign of forced deleveraging. Instead, capital appears to be rotating toward quality, profitability, and near-term cash generation.

In the near term, AI stocks are likely to remain volatile, with selective consolidation rather than a trend reversal. The key question is not whether AI demand exists, but who can convert it into sustainable margins without overextending balance sheets. That distinction will increasingly drive performance.