--- title: "Better To Be a Buyer: A Note on This Dislocation" description: "The Point #56: Semiconductors fell 27% in less than a month after the midterms. Why we believe the sell-off overestimates the election's impact on AI." --- [Skip to content](https://thepoint.ciogroup.com/episode/56#main-content) [![The Point logo](https://thepoint.ciogroup.com/hs-fs/hubfs/ThePoint_logo_WHITE-nav.png?width=150&height=50&name=ThePoint_logo_WHITE-nav.png)](https://ciogroup.com/) Open main navigation Close main navigation [All posts](https://thepoint.ciogroup.com/episode/all) November 5, 2026 # Better To Be a Buyer: A Note on This Dislocation By  Steven Wieting & David Bailin  ·  4 minute read [Download PDF](https://thepoint.ciogroup.com/hubfs/The%20Point%20EP56.pdf) [All Episodes](https://thepoint.ciogroup.com/home) In explaining the US mid-term election results, Vice President JD Vance was definitive: “The reason we lost is the war.” To some he is right. The war in Iran inflated oil prices, spiking inflation and shocking consumers across the US. But that’s not all. Across the nation, there were [45 special ballots](https://www.kcra.com/article/voters-reject-data-centers-midterm-election-communities-moratorium-election-day-ai/74335767) asking if voters believe data centers should be restricted in local communities. The vote to restrict development passed in 44 cases. After the initial, momentary euphoria, markets today began calculating what a real slowdown in the rollout of AI might mean to the broader economy. Semiconductors are down 13.8% for the week through Thursday and 27% for the month; electrical equipment (-11.3%) and construction machinery (-8.3%). Hometown hero Caterpillar (CAT) was down 11.1% for the week through Thursday. You might not think of CAT as an “AI stock”, but it has risen like one, doubling since April 2025. Though we believe the “hypergrowth” phase of the AI infrastructure buildout is over, a short-term dislocation of the magnitude of 27% probably overestimates the impact of the election. We are seeing clear signs of exaggeration in elements of the “infrastructure purge.” Figure 1 shows the near-doubling in US construction spending on data centers in the past year. A wider measure of private construction contract signings has jumped even more. There is no other source for “hypergrowth” in US construction besides data centers. That said, it is premature to believe that existing, committed projects will not keep humming along. The bigger risk, a material slowdown in approvals or outright bans is a year or two away. ![Figure 1: US Construction Spending on Data Centers vs Total Private Construction Contracts (Y/Y%). Source: CIO Group, Haver Analytics](https://thepoint.ciogroup.com/hubfs/EP%2056%20-%20FIG%201.png) US voters clearly have had their fill of large, humming data factories being located close to homes and drinking water sources. Yet the message from Figure 1 is that a great deal of the construction on approved data centers will be finished. The semiconductors and tech hardware that will fill these data centers has been ordered, but not installed. In our view, Tuesday’s election outcome will not make tech hardware spending go down. It may change the rate of order growth as 2027 unfolds, however. Data center spending is the strongest, if narrow, growth contributor to the US economy. There are numerous signs of decelerating growth (see figures to follow). But just like the spending on routers and fiber-optic cable that powered the fledgling internet, the future of AI is about a transformative type of capital, not a building boom. What is developed by AI is more important for long term investors and the growth in the world economy. ## Early Warnings Like Late 1990s In the past two years, investors have followed a course similar to the late 1990s. They focused not as much on the corporate beneficiaries of AI services or even those who will provide the AI services themselves. They bet most heavily in the hardware on which AI runs. Some of the largest firms that provided internet gear failed to survive. The shares of a few that did, suffered a negative return over the subsequent twenty years. Looking back, we see that web content flourished straight through a bust in equipment and transmissions (fiber-optic cable) spending across the early 2000s. This is precisely what will occur long after the AI building boom fades, in our view. Yet today’s AI buildout is also different from the last tech boom in the late 1990s. The biggest spenders are strong, mature and diversified companies, not “experiments.” “Token” pricing data shows demand for computing power well in excess of capacity. Our tally of spending intentions for the four largest AI spenders shows their plans for 2027 are a spending increase of 48% compared to 89% in 2026 (see figure 2). Their level of spending alone is expected to exceed $1 trillion next year. And as for the bond market that will finance the next wave of investment, hyperscaler credit spreads are hugging US Treasury yields, quite unlike “neocloud” CoreWeave, which stands as an outlier (see figure 3). ![Figure 2: Capital Spending of the Four Largest Tech Spenders vs Semiconductor Shares. Source: CIO Group, Haver Analytics, Bloomberg](https://thepoint.ciogroup.com/hubfs/EP%2056%20-%20FIG%202.png) ![Figure 3: Credit Market Divergence – Speculative vs Solid. Source: CIO Group, Haver Analytics, Bloomberg](https://thepoint.ciogroup.com/hubfs/EP%2056%20-%20FIG%203.png) ## Semiconductor Shares -27% for Month Of course, 48% growth is slower than 89% growth. Numerous indicators show a “post-peak” growth rate for 2027 (see figure 4). Yet semiconductor shares have fallen 27% in less than a month. Shares are now up just 2% over the past 12 months while EPS have risen 132%, collapsing valuation for the group (see figure 5). EPS estimates show a 64% gain for the group in 2026, consistent with the rise in AI capex spending intentions. EPS estimates for 2028 show a 32% gain, still twice the pace of other industries. ![Figure 4: Total Business Equipment Investment vs Computers Nominal Spending Y/Y%. Source: CIO Group, Haver Analytics](https://thepoint.ciogroup.com/hubfs/EP%2056%20-%20FIG%204.png) ![Figure 5: Semiconductor and Equipment EPS vs Share Prices and Consensus Estimates Y/Y%. Source: CIO Group, Haver Analytics, Bloomberg](https://thepoint.ciogroup.com/hubfs/EP%2056%20-%20FIG%205.png) In other words, markets that overshot on the upside may be overreacting now on the downside. It could very well be that estimates for 2028 are far from reality. We will maintain our “risk watch vigil” over the future of tech hardware, which is likely to be a component of a future US recession and bear market (see figure 6). We also know from experience that there are many false warnings of collapse that can come prematurely. We suspect we are seeing one now. ![Figure 6: IT Equipment Investment as % of US GDP Vs Semiconductor and Hardware Market Cap as % of S&P 500. Source: CIO Group, Haver Analytics](https://thepoint.ciogroup.com/hubfs/EP%2056%20-%20FIG%206.png) Our own portfolios are highly diversified with fixed income and overweights to some defensive sectors. We are neither over- or underweight equities (see [last week’s](https://thepoint.ciogroup.com/episode/55) Point). One of our Active Asset Allocation Principles (See our [Outlook for 2026](https://thepoint.ciogroup.com/outlook-2026)) is to take advantage of market dislocations. We believe in doing so even if the opportunity conflicts with our long-term market return view (conservative). If panic builds in a way that is inconsistent with near-term fundamentals, we may consider adding to tech hardware and other newly-maligned industries tactically in weeks to come. ## Important Information This material has been prepared by CIO Capital Group, LLC (“CIO Group”) for informational purposes only and does not constitute investment advice or an offer to buy or sell any security or the solicitation of an offer to buy any security or investment advisory service. All opinions are subject to change without notice. Past performance is not indicative of future results. Investment returns may vary significantly over time. Indexes are unmanaged, are not available for direct investment, and do not reflect the deduction of fees or expenses. This material has been prepared without regard to the specific investment objectives, financial situation, or particular needs of any individual investor. CIO Group believes that the information obtained from third party sources contained herein is reliable, but no representation or warranty is made regarding its accuracy or completeness. CIO Group accepts no responsibility or liability (including for indirect, consequential, or incidental damages) for any error, omission, or inaccuracy in such information and for results obtained from its use. Certain information contained herein constitutes ‘forward-looking statements’ which are based on current expectations, estimates, projections, and beliefs. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Any forecasts, projections, estimates, or market expectations are based on current assumption and should not be considered guarantees of future events or investment results. References to portfolio positioning, asset allocation, sectors, or investment strategies reflect CIO Group's views as of the date of publication and should not be interpreted as recommendations to purchase or sell any particular security or investment strategy. CIO Group is an investment adviser registered with the SEC. Copyright ©2026 CIO Group. All rights reserved. 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