Summary

• The recent sell-off in software names and concerns over reduced hyperscaler stock buybacks are primarily an intra-market rotation, not a broad market rout, with the S&P 500 remaining resilient near highs.
• Traditional B2B software companies are being re-evaluated as "high cost leeches" on other businesses' cash flows, with the market now pricing them for less future success, potentially benefiting "real economy companies" leveraging AI to reduce SaaS reliance.
• Hyperscalers are redirecting massive free cash flow ($600B+ and growing) from buybacks into CAPEX, leading to a significant reduction in business savings rates, increased borrowing, and a direct injection of capital into economic activity.
• This surge in hyperscaler CAPEX is a powerful macro driver, expected to foster stronger economic growth and upward pressure on bond yields, ultimately making the aggregate stock market "pretty clearly favorable to stocks vs. bonds ahead," with credit risks deemed modest for large tech but higher for private equity/credit exposed to software.

=== MARKET IMPLICATIONS === * Overall Market: The aggregate stock market (e.g., S&P 500) is expected to benefit from the macro tailwinds of stronger economic growth driven by the massive hyperscaler CAPEX, which is seen as a more significant positive than the negative impact of reduced buybacks on specific companies. * Sector Rotation: A clear rotation is anticipated out of traditional B2B software companies, which are viewed as facing fundamental challenges and re-pricing. Conversely, "real economy companies" that can leverage AI to reduce their reliance on traditional SaaS are expected to see higher profits and improved breadth of market strength. * Bond Market: The increased borrowing and economic activity stemming from hyperscaler CAPEX are projected to exert "upward pressure on bond yields," implying a bearish outlook for bonds, particularly