AI rally attracts global capital and pressures flow into bitcoin

The strong appreciation of companies linked to artificial intelligence has caused a phenomenon that goes beyond the American stock market.

As investors pour resources into AI-related stocks and ETFs, other risky assets such as cryptocurrencies face a more challenging environment in attracting capital.

In recent months, technology giants have boosted Wall Street's main indices. According to Pedro Fontes, Research analyst at Mercado Bitcoin, the movement generated a concentration of liquidity around the artificial intelligence thesis and increased the opportunity cost for investors.

"There is indeed an opportunity cost effect happening. When a sector concentrates such significant returns in a short period, it is natural for investors to reallocate capital to participate in this trend", he states.

According to the expert, around 65% of the recent rise in the S&P 500 came from just 10 companies, half of which were in the semiconductor sector. The semiconductor index (SOX), one of the main thermometers of the AI industry, accumulated an appreciation of close to 66% in just two months.

At the same time, the cryptocurrency market has experienced a weakening in investment flows.

Since bitcoin's recent top, cryptocurrency spot ETFs in the United States have recorded billions of dollars in net outflows, reversing a relevant part of the contributions that had previously driven the asset's appreciation.

Bitcoin's correction cannot be attributed to a single factor. In addition to the concentration of capital in artificial intelligence, the crypto market faces its own challenges and a more restrictive macroeconomic environment, notes the analyst.

"The flow that helped drive bitcoin's rise was practically returned during the correction. At the same time, the concentration of capital in the AI thesis has been an important force in this process", he explains.

For Julia Santos, founder of Contadora Cripto, investor interest in digital assets has not disappeared, but has started to compete with a narrative that currently dominates the global market.

"What we are experiencing is not the end of interest in crypto, but a migration of liquidity. Venture capital has focused on a single narrative, that of artificial intelligence, and this has increased the opportunity cost of any other asset", he states.

According to her, the phenomenon helps explain why the cryptocurrency market is going through a period of lower retail participation, even without structural changes to bitcoin's investment thesis.

"When Nvidia, SpaceX and the AI theme deliver significant returns, the investor no longer needs crypto to have exposure to risk with a story to tell. The result is a more apathetic retail and smaller volumes", he says.

Although AI is seen as one of the most transformative technologies of the coming decades, experts warn that moments of strong concentration often increase market vulnerability.

Fontes highlights that indicators traditionally used to assess the level of appreciation of American stock markets already show signs of attention. One of them is the so-called Buffett Indicator, which compares the total value of the United States stock market with the country's Gross Domestic Product (GDP).

"The Buffett Indicator reached approximately 238%, the highest level in history and well above what was observed during the internet bubble. This does not mean that AI is a bad thesis, but it shows that part of the market already has extremely optimistic expectations", he states.

However, investors' search for companies linked to artificial intelligence may also be creating a new type of risk concentration.

"The irony is that, by avoiding the risk of cryptocurrencies to focus on technology stocks linked to AI, the investor may be assuming an even greater concentration than the one he tried to avoid", assesses Santos.

Given this scenario, it is important to build your portfolio based on diversification and liquidity.

To this end, investors who participated in the strong rally in AI-linked assets can consider realizing part of the gains and rebuilding cash positions, without necessarily abandoning the long-term thesis.

"The main word right now is balance. We don't see the scenario as a choice between AI or crypto, but as an opportunity to rebalance risks, increase liquidity and gradually build positions where the relationship between risk and return seems more favorable", advises Pedro.

Although the crypto market is already approaching levels historically associated with moments of greater investor pessimism, the scenario may improve prospects for those who invest with a long-term horizon.

"In moments of high concentration of attention and stretched prices in part of the market, liquidity stops being idle money and becomes a strategic reserve to take advantage of future opportunities", he adds.

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Source: CNN