Investors are dumping AI stocks as ‘tech wreck’ worsens. Here’s where they’re turning now.

The ongoing pullback in AI-linked equities is prompting a visible rotation rather than a broad exit from markets. Investors who had concentrated heavily in high-momentum technology names appear to be moving toward government bonds, a traditional destination when risk appetite cools. The shift suggests concerns about stretched valuations and crowded positioning in the AI trade, not necessarily a rejection of the technology's longer-term potential.

That rotation carries a complication. Government bonds typically benefit when growth worries dominate, but persistent inflation can push yields higher and erode bond prices, leaving investors caught between two uncomfortable options. In other words, the usual safe-haven playbook may not work as cleanly as it has in past selloffs.

What to watch: whether the selling in AI names broadens or stabilizes, how bond yields respond to incoming inflation data, and whether the rotation proves temporary or reflects a more durable change in portfolio preferences. For now, the move looks less like a verdict on AI and more like a reassessment of risk.