Sarah Kunst of Cleo Capital went on CNBC Friday morning and said what a lot of portfolio managers have been muttering to themselves all week. “People are wondering if putting all of their eggs into the AI, a sort of high growth hyperscaler basket, was maybe not the best idea over the past couple of years.”
The backdrop matters here. The S&P 500 is down 1.8% on the week, while the NASDAQ 100 has dropped 3.27% and is sitting on a roughly 1.9% monthly loss. Equal-weighted names, health care, industrials and financials are catching bids while the hyperscalers bleed. Kunst’s read is that this is a “healthy” rotation, and the names she flagged on weakness include Alphabet (NASDAQ:GOOGL | GOOGL Price Prediction), Apple (NASDAQ:AAPL), Taiwan Semiconductor (NYSE:TSM), Micron (NASDAQ:MU) and SK Hynix.
What actually broke this week
The catalyst was earnings anxiety around AI infrastructure costs at Apple and Microsoft (NASDAQ:MSFT). Apple is down 6.2% on the week and 9.4% over the past month, and Thursday’s session alone took the stock 6.12% lower. Microsoft is in worse shape.
It is down 22% year to date and 25.6% over the past year, despite Q3 results that showed TTM EPS up 30%. The disconnect is the capex bill. Microsoft spent $30.88 billion on capex in Q3 alone, up 84% year over year, and Alphabet has guided 2026 capex of $175 billion to $185 billion. Investors are now asking how that math compounds.
Where the money is rotating
It is going to the suppliers. Micron reported Tuesday and the $41.456 billion in revenue beat consensus by 17.60%, with non-GAAP EPS of $25.11 versus $20.28 expected. Revenue grew 345.72% year over year and GAAP gross margin expanded from 37.7% to 84.6%.
In addition, MU stock is up 270% year to date. CEO Sanjay Mehrotra called it evidence of “the strategic value of memory in the AI era” and guided Q4 to $50.0 billion ± $1.0 billion with gross margins around 86%. Taiwan Semiconductor is the other beneficiary. May revenue grew 30.1% year over year and CEO C.C. Wei has guided full-year 2026 growth above 30%.
The Alphabet case Kunst keeps making
Alphabet is the cheapest mega-cap on her list at a P/E of 15x, well below Apple’s 36x and Microsoft’s 26x. Q1 FY26 revenue grew 21.8% to $109.9 billion and Google Cloud grew 63%, with backlog nearly doubling sequentially to over $460 billion.
Moreover, Sundar Pichai noted on the call that “Waymo surpass[ed] 500,000 fully autonomous rides a week.” Reddit retail is less convinced. The bearish narrative this week has been an AI talent exodus, and posts about Google losing top researchers to OpenAI and Anthropic have peaked at 470 upvotes. Alphabet shares are down 6.61% this week, though still up 101.95% over the past year.
What Kunst is really arguing
Her framing rejects sector ETFs as the answer. “You’re not buying a sector. I think you’re buying into individual names that have been a little bit undervalued to begin with, and now are dipping even lower and names that can recover and that have a great sort of business.”
Apple’s tape supports the “undervalued on dip” angle loosely. Q2 FY26 revenue of $111.18 billion grew 16.6%, EPS of $2.01 beat by 3.61%. Furthermore, the board authorized a fresh $100 billion buyback. Kunst’s broader point is that a market in touch with reality should reward the companies actually building the AI plumbing. The week’s tape says it agrees.
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