Global Investors Rotate Into Cheaper and Smaller Stocks as Risk Aversion Weighs on Big Tech

Global equity markets are undergoing a renewed phase of market rotation, as investors shift capital away from expensive technology leaders and into cheaper stocks, smaller companies, and dividend-growth strategies, amid rising uncertainty over artificial intelligence spending and the durability of traditional business models.

According to Reuters, heightened volatility in the technology sector has prompted investors to reassess exposure to large-cap AI-driven companies, particularly as concerns mount over elevated valuations, slowing growth momentum, and the long-term return profile of massive AI infrastructure investments.

The rotation has benefited small-cap equities, equal-weighted indices, and companies with consistent dividend growth, which are increasingly seen as defensive allocations during periods of macro and sector-specific uncertainty. Market participants point to a growing preference for businesses with clear cash-flow visibility, lower leverage, and more attractive valuation multiples.

The Russell 2000 index, a benchmark for U.S. small-cap stocks, has outperformed the broader technology sector during recent sessions, reflecting a shift away from hyperscale AI leaders whose future earnings expectations are now facing closer scrutiny. Investors are increasingly questioning whether aggressive capital expenditure plans in artificial intelligence can translate into sustainable profitability without disrupting existing revenue models.

Financial media outlets including Yahoo Finance, The Economic Times, and Business Recorder report that portfolio managers are favoring value-oriented stocks and smaller firms as a hedge against concentrated exposure to a narrow group of mega-cap technology companies.

Analysts note that while artificial intelligence remains a long-term structural theme, near-term market dynamics suggest a recalibration of expectations. As risk aversion increases, investors appear more inclined to diversify away from crowded trades and toward segments of the market that offer relative valuation support and income stability.

Market strategists caution that this rotation does not signal the end of the AI cycle, but rather a pause in enthusiasm as investors demand clearer evidence of monetization, efficiency gains, and sustainable returns on capital in the world’s largest technology firms.

• Reuters — Global Markets & Equities Coverage
  https://www.reuters.com/markets

• Yahoo Finance — Market Rotation & Equity Strategy
  https://finance.yahoo.com

• The Economic Times — Global Markets & Investment Trends
  https://economictimes.indiatimes.com

• Business Recorder — International Equity & Capital Markets
  https://www.brecorder.com