AI's Grip on Crypto Market Fades as Institutional Investors Pour Money In

The crypto market has shown renewed signs of life as institutional investors fueled the longest streak of inflows into US spot Bitcoin exchange-traded funds (ETFs) since April. However, a more intriguing story may be unfolding outside crypto: AI's grip on speculative capital is beginning to loosen.

After dominating markets for nearly two years, the AI trade is becoming more selective as investors distinguish between companies with sustainable earnings and those riding the hype cycle. The Philadelphia Semiconductor Index (SOX) recently slipped into a technical bear market after falling 20% from its recent high, although it remains well above year-ago levels.

Some analysts believe this shift could mark the beginning of a broader rotation back into digital assets. Improving regulatory clarity, a recovery in ETF demand, and easing enthusiasm for AI are creating a more constructive backdrop for crypto than investors have seen in months.