A shift may be emerging in the stock market as investors begin to rotate away from artificial intelligence–focused equities. According to Astoria Portfolio Advisors CEO and chief investment officer John Davi, a wider range of sectors is starting to gain traction as liquidity flows back into the market.

Davi noted in a recent interview on CNBC’s “ETF Edge” that the Federal Reserve’s policy moves are playing a central role in this transition. The Fed implemented four rate cuts last year and has already made two more this year. With another cut expected in either December or January, he believes the market may be entering a new phase. Historically, he explained, periods of monetary easing often signal the beginning of a fresh cycle in which market leadership quietly shifts.

He pointed to recent performance in segments such as emerging markets and industrials as evidence of this trend. As of Wednesday’s close, the iShares MSCI Emerging Markets ETF has risen 17% over the past six months, while the Industrial Select Sector SPDR Fund has gained 9% during the same period.

Davi suggested that these areas may serve as effective counterweights to large-cap technology stocks, which have grown increasingly expensive and now dominate the typical investment portfolio. In an environment characterized by structurally higher inflation and ongoing rate cuts, he questioned the logic of concentrating risk in just a small group of tech giants.

Instead of placing heavy emphasis on the so-called Magnificent Seven — Apple, Amazon, Meta Platforms, Nvidia, Microsoft, Tesla, and Alphabet, which together account for roughly a third of the S&P 500 and are trading near record highs — Davi favors a globally diversified and more balanced strategy.

Sophia Massie, CEO of ETF provider LionShares, echoed this cautious stance toward leaning too heavily on AI-related investments. She acknowledged that analysts have formed expectations about the economic value AI could create, but she believes the distribution of that value across individual companies remains uncertain. In her view, the market may currently be pricing in a scenario in which a single company emerges as the dominant force in AI, a prediction she sees as far from certain.

Both experts emphasize that while AI remains a transformative force, investors may benefit from maintaining broader exposure as the next market cycle takes shape.