Even as $2.3 trillion in market value was erased from tech’s elite “Magnificent 7” stocks last month, a handful of hardware companies added billions to their valuation, a report has claimed, adding that the reason for this is that investors have begun dumping shares of the tech giants – Microsoft, Nvidia, Alphabet, Apple, Meta, Tesla and Amazon – sending the their stocks plunging 10% in June. However, the semiconductor sector has experienced a historic surge.
Why investors are selling their shares and tech winners
According to CNBC, the sell-off is driven by a growing anxiety: investors are tired of waiting for financial returns on the billions of dollars tech giants are spending on AI infrastructure, much of which is being funded by corporate debt. The massive fortunes being spent by Big Tech haven’t vanished as they are pouring directly into the bank accounts of the hardware suppliers building the backbone of the AI boom.
Supply chain players are winning
While the Magnificent 7 index has dropped 3.4% overall this year, the semiconductor sector has experienced a historic surge. The Philadelphia Semiconductor Index has rallied more than 90% this year, tacking on another 6% gain just this month.Since tech giants are buying up microchips and physical components, a severe global supply shortage has driven prices through the roof. This has triggered a massive windfall for four critical supply chain powerhouses. TSMC, the world’s primary manufacturer of advanced AI processors, got a 6% sector jump this month.ASML, manufacturer of extreme ultraviolet lithography machines needed to print chips, drove record supply-chain demand; SK Hynix, Korean memory giant supplying ultra-fast High Bandwidth Memory, registered a 166% sector surge this year; and Samsung Electronics, global semiconductor leader capitalising on soaring memory component prices, is the main beneficiary of the memory bottleneck.Highlighting this explosion, the Roundhill Memory ETF – which tracks elite hardware names like SK Hynix and Samsung – has skyrocketed by 166% this year.
A July ‘Gut Check’ looms
The market rotation sets up a high-stakes showdown for next month’s second-quarter earnings season. Tech companies will have to prove to anxious shareholders that their massive infrastructure bills are actually translating into software profits.Dan Ives, managing director at Wedbush Securities, warned that Wall Street is currently navigating a high-stress transition period before the financial data drops.“We are going through another ‘gut check’ few weeks ahead for the tech trade as tech investors await a very important 2Q earnings season in July to further validate the AI Revolution buildout. In the meantime, jitters will continue as worries around the costs of this once-in-a-generation tech buildout hit its next gear of growth,” Ives wrote in a note to clients.
