Why Wall Street Is Shifting Its AI Bet Toward Software Over Infrastructure

Wall Street is recalibrating its outlook on the artificial intelligence sector as industry leaders advocate for a more measured pace in frontier AI development. While some investors fear this could signal a contraction in capital expenditure, analysts at Bernstein argue that a shift from 'extremely fast' to 'somewhat fast' development will not dampen AI spending. They point out that current demand for inference and computing capacity remains high, and that enhanced safety measures may actually foster long-term corporate adoption. Consequently, Bernstein maintains a positive outlook on chip giants like Nvidia and Broadcom. Meanwhile, ISI Evercore suggests the market is entering a new phase where value shifts toward software firms that specialize in enterprise integration, security, and governance. The logic is that business success now relies on deploying AI into repeatable, secure workflows rather than just accessing the latest frontier models. This sentiment was reflected in recent market activity, where the iShares Expanded Tech-Software Sector ETF rose 5% while the iShares Semiconductor ETF dipped 6%. However, analysts at RBC Capital Markets warn that while a deceleration in frontier development might help industry laggards, it could simultaneously postpone the launch of advanced AI features that software companies rely on for their future growth.