AI spending is splitting in two, and that shift is bad news for expensive chip stocks but good for AI software companies.

• The AI market is splitting: pricey frontier chips for big players like Musk and OpenAI, versus cheaper business-grade hardware most companies actually use.
• Open models from Meta and Alibaba now get regular businesses 90% of the way to top-tier AI at a fraction of the cost, killing demand for the priciest gear.
• The big spending on high-margin Nvidia chips is seen as close to its peak, propped up by circular deals where Nvidia invests in companies that then buy its chips.
• Companies that just assemble PCs and parts (like Corsair) stay low-margin; the real winners are survivor software names like Palantir and Axon.
• A doubt is cast on true artificial general intelligence, with AI still weak at reasoning in new situations — suggesting progress is flattening out.

Outlook: One more six-month wave of chip demand may come as SpaceX and AI-lab cash gets spent, but by late this year the money is expected to rotate from hardware into AI software.