Investing.com -- HSBC told investors in a note on Thursday that concerns about hyperscaler overspending have emerged as the dominant narrative in the AI-driven equity market, as investors rotate between competing themes through 2026.

Analyst Alastair Pinder introduced a clustering model designed to identify which AI narrative global equities are attaching to, tracking patterns across hyperscaler, semiconductor, software and China internet returns.

The firm said equities and market internals have swung sharply this year as investors "jump between competing AI narratives," pointing to Moonshot's launch of Kimi K3 and reports of lithography competition from mainland China as recent catalysts.

According to HSBC, the model splits the market into five distinct regimes. The most pressing is said to be "hyperscaler overspend," which carries a 37% probability and sees data center and semiconductor names outperform "at the expense of the capex spenders."

In that scenario, tech hardware returns an annualized 12.3% and semiconductors 11.8%, reinforcing a rotation into Korea and Taiwan.

Other narratives include "AI positioning capitulation," at 26%, in which crowded trades unwind into defensives such as pharma and biotech, while semiconductors fall 14.3%. "China competition concerns," at 20%, is the theme HSBC said Kimi K3 has reactivated, driving a rotation into mainland China media and consumer services.

The firm assigned lower odds to "AI disruption fears" at 9% and "AI euphoria" at 8%, the broad risk-on state in which the AI supply chain leads and semis gain 19.1%. HSBC explained that the framework helps assess how emerging-market equities perform and rotate as the narrative shifts.