Investors are bored with an AI narrative that has helped them get three years of back-to-back, double-digit market gains.

Why it matters: This bull market has been primarily driven by a deep belief in the AI narrative. It's unclear what will drive stocks without that faith.

What they're saying: "If you think about the history of technology equities back to various bubbles, late in the cycle, investors say the names have become tired," Paul Kedrosky, a venture capitalist, tells Axios.

• "That's investor parlance for, like, 'I'm bored.'"
• The XLK ETF tracking Big Tech stocks is down over 4% this year.

Between the lines: AI companies keep spending money on their buildouts with the promise that it will lead to lucrative returns.

• That shiny future was enough to sustain stocks and investor sentiment for a few years, but Wall Street needs a new story to keep it excited.
• That's especially true as the biggest tech companies are spending more and more: JPMorgan expects the data center buildout amid the AI boom to cost more than $5 trillion.
• That's a sixth of the entire GDP of the U.S.

Zoom in: Even within AI, investors are still seeking out clearer use cases.

• Bank of America sent clients a note on how "AI has left the chat," but physical AI is in.
• Think robots, autonomous vehicles and drones.
• This reflects the broader sentiment: Investors want stuff they can see, not promises that are expensive.

Yes, but: If software stocks are tanking because AI will replace software, shouldn't AI stocks be up?

• Investors can be fickle.
• "Not every sell-off is a signal – some are just stress tests," Mark Malek, chief investment officer at Siebert Financial, wrote in a note to clients.
• And the tech sell-off has been coupled with a so-called rotation into less expensive corners of the market, which is exactly what those worried about an AI bubble wanted to see happen.

What we're watching: Investors are "desperate for new names," Kedrosky says, and the good news is they're almost certain to get their wish this year, with major AI competitors expected to go public as they seek more capital to fund their ambitions.

• That could suck even more air out of the Magnificent 7 as investors are lured by "shiny new toys" that go public, he notes.

The bottom line: Wall Street needs a new catalyst to bring the spark back to its AI love affair.

As tech stocks are getting hammered, Wall Street is bidding up real-world, real-goods companies, consumer staples that are likely to stick around even as AI disrupts other industries.

Why it matters: When investors don't understand tech bubbles, they buy soap bubbles instead.

Catch up quick: Yesterday, the S&P 500 fell 1.2%. Consumer staples was one of only two sectors (utilities was the other) to end the day with a gain.

• Consumer staples are having their best performance since 1997, up 12% year-to-date, according to Bank of America.
• The four-week average of money flowing into consumer staples, compared with the sector's market value, has hit a record high.
• Walmart just entered the trillion-dollar company club as investors bid up the stock.

Between the lines: Investors are rotating into stocks that represent the real world as AI is pummeling sectors like software, which investors worry won't have a use case in a world with Claude Code.

Yes, but: It's hard to tell whether this is a belief in the fundamental use case of, for lack of a better term, basic businesses, or if investors just don't know what to do with their money right now.

• The market is having a DeepSeek-like moment that's pummeling software companies.
• You could buy the dip, but you risk catching a falling knife.
• BofA sees fundamental reasons to like staple stocks, though: an affordability focus from the administration that could boost consumer spending and continued pressure on the dollar that can lift earnings.

Threat level: The most eccentric AI enthusiasts in Silicon Valley see a future where humanity is wiped out, as human workers are no longer needed.

• That would, of course, be bad for consumer staples, and presumably most stocks except maybe a few surviving AI overlord companies.
• But as investors remind themselves during every crisis, stocks would be the least of our worries in that doomsday scenario.
• So buy soap and Wet Wipes! Humans still need to clean, even if AI is taking over several industries.

The bottom line: Investors are hiding out in real-world companies while they wait to see who the winners and losers of the AI revolution are.

Most institutional investors say AI is a key part of their investment research process, according to a new report from Brunswick Group.

Why it matters: It's not just young retail investors who are relying on AI to inform investing strategies.

By the numbers: 54% say AI outputs are an important part of their research, per the report.

• Roughly 7 in 10 say AI has changed the way they approach earnings calls, with 46% saying they are more likely to skip the calls and review AI-generated summaries instead.
• Of note, 4 in 10 say they trust AI summaries of financial content as much as ones written by the sell-side.

What to watch: AI may be too good for financial analysts in particular.

• According to a recent Stanford study, AI is expected to decrease wages for financial analysts — one of only two sectors predicted to face pay declines of the 22 studied.

💭 Thought bubble: Information is edge on Wall Street, and the best analysts will survive by continuing to get information that isn't available to AI that informs their stock ratings.

• Without that informational edge, the work may be increasingly outsourced to large language models.

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