AI Market Rally Stumbles as US Equity Fund Inflows Hit One-Month Low in November 2025
- Why Are Investors Pulling Back From AI Stocks?
- Where Is the Money Going Instead?
- Is This the End of the AI Boom?
- What's Next for AI Investments?
- FAQs About the AI Market Pullback
The AI-driven market surge is showing cracks as investor enthusiasm wanes, with US equity funds recording their lowest inflows in a month. Tech stocks took a beating, bond markets saw renewed interest, and Wall Street's love affair with AI shows signs of cooling - at least temporarily. Here's why the smart money might be hitting pause on the AI Gold rush.
Why Are Investors Pulling Back From AI Stocks?
The Nasdaq Composite's 4.8% drop from its October highs tells part of the story. After reaching a record 24,019.993 points, the tech-heavy index has given back nearly 5% as investors reassess AI valuations. "We're seeing classic profit-taking behavior," notes a BTCC market analyst. "When Palantir drops 8% after strong earnings simply because of its P/E ratio, you know sentiment is shifting."
US equity funds attracted just $1.15 billion in the week ending November 12 - the weakest showing since October 15 when outflows hit $557 million. Large-cap funds saw inflows plummet from $11.91 billion to $2.35 billion, while small and mid-cap funds suffered outflows of $889 million and $1.36 billion respectively.
Source: LSEG, Weekly flows into US equity, fixed income and money market funds (in millions of dollars)
Where Is the Money Going Instead?
Bonds are back in vogue, with fixed income funds pulling in $8.96 billion versus $4.63 billion the prior week. Investors showed particular appetite for:
- Short/intermediate government/Treasury funds ($3.01 billion)
- Investment-grade short/intermediate funds ($2.06 billion)
- National taxable fixed income funds ($1.96 billion)
The healthcare sector finally saw inflows after four weeks of outflows ($777 million), while tech scraped by with $1.74 billion - its worst performance in nearly a month.
Is This the End of the AI Boom?
Not necessarily. Major corporations continue betting big on AI infrastructure:
- Google's $6.4 billion German data center investment
- 15-year renewable energy deal with TotalEnergies (1.5 TWh for Ohio data centers)
- $25 billion earmarked earlier this year for AI infrastructure expansion
- $3 billion planned for Pennsylvania hydroelectric plants
"This feels like 2021's crypto correction," observes Peter Atwater of William & Mary. "The underlying technology is transformative, but market valuations got ahead of reality." Oracle's 75% 2025 surge and Palantir's 135% AI-driven growth show the sector still has legs, just maybe not at October's breakneck pace.
What's Next for AI Investments?
The smart money appears to be shifting from speculative plays to infrastructure. While AI software stocks cool off, the picks-and-shovels plays - data centers, renewable energy providers, chip manufacturers - continue attracting capital. As one hedge fund manager quipped, "During the gold rush, sell jeans - that's where we're at with AI now."
This article does not constitute investment advice. Market data sourced from LSEG and TradingView.
FAQs About the AI Market Pullback
How significant is the current pullback in AI stocks?
The Nasdaq's 4.8% drop from October highs represents a moderate correction rather than a crash. Similar pullbacks occurred in April 2025 before the rally resumed.
Why are bond funds suddenly attractive?
With October's weaker labor market data and AI valuations looking stretched, investors are rotating into safer assets. The nearly $9 billion flowing into bonds suggests a classic "risk-off" move.
Are big tech companies still investing in AI?
Absolutely. Google's recent multi-billion dollar commitments prove major players see AI as a long-term play, even if retail investors are taking profits.
