AI Investment Interest Shifted Beyond Semiconductor Firms

Investors are pivoting toward software and data infrastructure as technology valuations face pressure from higher yields.

Updated on Oct. 4, 2026 in Investing

Isometric editorial illustration of a dense cluster of optical fiber cables and metallic server racks, representing data infrastructure. — Investors are reallocating capital toward data infrastructure and software firms as the focus of AI-related spending shifts from semiconductor hardware to operational productivity. AI Illustration. Upload story photo >

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Is now a good time to focus on individual stocks rather than broad technology sector funds?

Goldman Sachs reported that capital is moving toward software, cybersecurity, and data infrastructure as the focus on AI expands beyond semiconductor hardware. This transition occurs as the market evaluates productivity gains and revenue potential amid higher interest rates.

Why it matters

Higher Treasury yields have compressed technology stock valuations, forcing investors to demand measurable earnings growth from AI spending. This shift reflects a move away from speculative infrastructure investment toward firms demonstrating clear, actionable revenue opportunities.

Technology benchmarks have seen divergent results, with the iShares U.S. Technology ETF up 35% and the Global X Artificial Intelligence & Technology ETF up 30% year-to-date. Meanwhile, broader market pressure led to a 20% contraction in Nasdaq valuations.

The players

Goldman Sachs

A global investment bank that provides financial advisory, investment research, and wealth management services to institutional and individual clients.

The details

Rising interest rates have increased borrowing costs, pressuring technology stock multiples and curbing the high-growth environment typical of tech sectors. Investors are now moving down the technology stack toward security software and data infrastructure to find companies that can prove AI-driven productivity is enhancing their bottom lines. Success for these stocks now depends on delivering concrete revenue growth rather than just capital-intensive infrastructure spending.

Nasdaq valuations compressed by 20% throughout 2026.
SPY and DIA ETFs rose slightly during the after-hours session on Friday, October 2, 2026.
Projections suggest a potential path higher for technology stocks between 2027 and 2028.

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Money Landscape

This rotation in investment focus follows a year of significant valuation compression across technology stocks as higher Treasury yields altered market risk appetite. It marks a departure from earlier periods where capital was heavily concentrated on semiconductor hardware.

Households with technology-heavy portfolios should review their exposure to ensure they are balanced against potential continued volatility from interest rate changes. Speak with a qualified financial professional to determine if your investment strategy aligns with the focus on earnings-driven growth.

The takeaway

The move toward software and cybersecurity signals that investors are prioritizing companies with clear paths to AI-generated revenue. Consider reviewing your asset allocation to ensure it reflects your risk tolerance as the market shifts toward earnings-focused performance.