Tech Sell-Off Sparks Big Money Shift: Here's Where to Invest

• Money is rotating out of mega-cap tech into small and mid-cap stocks due to under-allocation, reasonable valuations, and higher growth potential.
• The current economic environment (strong GDP, low inflation) is favorable for small and mid-cap stocks.
• Hardware and semiconductor companies (e.g., Coherent) are benefiting from AI data center build-out, while some software companies (especially seat-based models) face displacement risks from AI.
• Healthcare (e.g., Tempest AI, Repligen, Stevanato) is another attractive sector, particularly companies involved in cancer diagnostics, biologics manufacturing, and drug delivery.
• Baron Capital focuses on deep fundamental research and a 3-5 year horizon to identify companies with strong free cash flow growth.

The video discusses a significant shift in investment from mega-cap tech to small and mid-cap stocks, driven by under-allocation, reasonable valuations, and better growth prospects in the latter. The guest highlights opportunities in hardware, semiconductors, and specific healthcare companies benefiting from AI and biologics trends, while cautioning about certain software segments.