Woofun AI reports that Morgan Stanley issued a cautious note regarding the U.S. stock market, warning that the rally driven by mega-cap technology stocks is losing momentum. The investment bank stated that investors are increasingly withdrawing capital from these large-cap names to rotate into other sectors, raising doubts about near-term all-time highs.

This shift stems from skepticism over whether massive AI infrastructure spending will yield tangible profits, with much of the positive AI news already priced in. Strategists argue that this rotation reflects a deeper reassessment of risk and reward rather than simple profit-taking, as investors question the pace of AI return generation.

Additionally, shifting monetary policy expectations, specifically anticipated Federal Reserve interest rate cuts, are driving capital away from tech toward sectors benefiting from lower rates. While some investors take profits from small-caps, others are selectively rotating into profitable AI beneficiaries, indicating a focus on earnings visibility over headline-grabbing names.