- The value of the Magnificent Seven stocks dropped 10% in June, wiping off almost $2.3 trillion from the share market.
- Investors are concerned about huge infrastructure spending by the tech giants.
- Investors will be waiting for the second quarter earnings season, which starts next month.
The value of the Magnificent Seven stocks has fallen 10% in June, wiping off almost $2.3 trillion from the share market. The decline comes as investors are concerned about the huge infrastructure spending by tech giants like Apple and Alphabet.
The Magnificent Seven - comprising Nvidia, Meta, Apple, Microsoft, Alphabet, Amazon and Tesla - are on course for their worst month in over a year, as per Financial Times.
Investors are concerned whether the giant spending commitments by big hyperscalers like Meta, Amazon and Alphabet, will return profits that justify the huge stock gains recently. In addition, the Magnificent Seven's margins could narrow due to the rising costs of components such as memory chips.
Some firms have fared worse than others. Microsoft has fallen 20% this month, CNBC reported. Nvidia is down around 13%. Shares of both Apple and Amazon have dropped around 8%.
In recent years, the Magnificent Seven have dominated US and global stock market returns, adding $15 trillion to their combined market value between the beginning of 2023 to the start of 2026.
Last year, the stocks accounted for over one-third of the S&P 500 index's total market capitalisation.
On the other hand, the Philadelphia Semiconductor Index, is on track for its best year since the apex of the dotcom boom in 1999. The index has surged 93% in the first half of the year, as hyperscalers' demand for hardware and limited supply have sent profits soaring.
Memory is a key bottleneck for hyperscalers, where a supply shortage has sent prices skyrocketing. The Roundhill Memory ETF, which tracks memory stocks such as Samsung, has surged 166% this year.
All eyes will be on the second quarter earnings season, which starts next month.
Uncertainty over when returns from artificial intelligence might be realised has increased, in both the Big Tech companies' cloud computing and core software businesses.
Over recent weeks, several early AI adopters, such as Uber, Walmart and Meta, have limited usage of the technology by staff or altered their approach after receiving huge bills.
Investors are now worried that AI revenues of Big Tech firms could be impacted by customers transitioning to cheaper models or restricting spending.
However, companies are still moving ahead with plans to spend almost $1trillion on data centres to fulfil AI demand.
