The cash isn't gone, it just moved to the chipmakers cashing in on the AI buildout
The megacap technology stocks that powered global equity returns for years have shed more than US$2tn this month, and the money is rotating toward the chipmakers profiting from that spending.
The Magnificent Seven, made up of Nvidia, Meta, Apple, Microsoft, Alphabet, Amazon and Tesla, has lost roughly US$2.2tn in value this month, according to the Financial Times, while CNBC put the figure at around US$2.3tn.
The group fell nearly 10 percent in June, the FT reported, its worst month in more than a year.
Investors are driving the selloff as they question whether the sums the largest hyperscalers, particularly Meta, Amazon, Microsoft and Alphabet, are pouring into AI infrastructure will generate enough profit to justify recent share price gains.
Some of that investment relies on debt, CNBC noted.
Margins also face pressure from the rising cost of components such as memory chips and electrical equipment, per the FT.
The money is flowing instead to the suppliers.
The Philadelphia Semiconductor index, which tracks US chipmakers, has almost doubled in the first half of this year and is on course for its best year since the 1999 dotcom peak.
CNBC reported the same index gained around 6 percent in June and more than 90 percent this year, against a 3.4 percent decline for the Mag 7.
Simone Ragazzi, a global equity portfolio manager at Algebris, said the firm has stepped back from the Magnificent Seven, keeping only "a bit of Nvidia," in comments to the FT.
He favors infrastructure, cooling, cables and connectors names, which he called "off the charts" and "difficult to stay out of," even though the rally "won't last for ever."
Chip and memory names have led the S&P 500 this year.
Sandisk has climbed around 825 percent, as per the FT, while Micron, Intel, Western Digital and Seagate Technology have more than tripled, with memory shortages expected to persist into 2028.
Shares in Taiwan Semiconductor Manufacturing Company have risen about 50 percent, lifting its market value above US$2tn, and Dutch equipment supplier ASML is up more than 80 percent.
The rotation marks what Vincenzo Vedda, chief investment officer at DWS, described to the FT as a “shift in market leadership” away from the megacaps that led during the software and internet era and toward semiconductors.
Not everyone expects the spending to pay off.
Vincent Mortier, chief investment officer at Amundi, questioned whether Big Tech can monetise its investments at scale.
"The jury is out to be honest," he said, urging caution. Key component suppliers, he told the FT, will gain "whatever the outcome of monetisation."
The declines have not been even.
Microsoft fell 20 percent in June and Nvidia around 13 percent, while Apple and Amazon each dropped about 8 percent, according to CNBC.
Every Mag 7 stock except Alphabet has trailed the broader S&P 500 this year, the FT reported, with Microsoft, Meta and Tesla down by double digits.
Some strategists cast the shift as a change in what these companies are, rather than a verdict on them.
The market is adjusting to a new narrative, Tom Lee, head of research at Fundstrat Global Advisors, told CNBC’s Morning Call, because the group has moved “from asset-light companies that produced a lot of free cash flow, now to ones that are more balance sheet intensive.”
Over time, he argued, investors will come to view that balance sheet “as a workforce” and “a moat.”
Attention now turns to second-quarter earnings, which begin next month.
The tech trade faces "another 'gut check' few weeks ahead," wrote Dan Ives, managing director at Wedbush Securities, in a note cited by CNBC.
Jitters "will continue," he added, as cost worries over a "once-in-a-generation tech buildout" mount.
The chip trade has held up better in the meantime.
The Roundhill Memory ETF, which tracks names such as SK Hynix and Samsung, is up 166 percent this year, CNBC reported.
Micron’s results last week “pour cold water” over skepticism about the AI story, “showing hard evidence for an AI backdrop that is alive and healthy,” HSBC multi-asset strategist Duncan Toms wrote.
UBS analysts made a similar case, though they cautioned that “diversification, both within and beyond AI, is essential.”
Technical signals suggest the megacap selloff may be nearing a turning point, according to Reuters.
The Roundhill Magnificent Seven ETF, or MAGS, dropped nearly 13 percent this month, its worst since launching in mid-2023, and closed below its 34-week moving average for the first time since mid-April.
Past breaks below that line, in early March 2025 and mid-February 2026, preceded further selling, Reuters reported, though support levels sit near US$60, US$58.70 and US$58.50. The ETF rallied 3.1 percent on Monday to close at US$63.52.
Cost pressure is building across the supply chain as well.
Apple last week raised MacBook and iPad prices by about 20 percent, citing the “unprecedented challenge” of rising memory prices, the FT reported.
Microsoft lifted Xbox console prices and warned that memory costs had doubled within months and could double again by late 2027.
