Semiconductor stocks slide as markets shift focus to data center-heavy tech firms amid AI capex discipline concerns.
U.S. semiconductor stocks have retreated over 11% in the past two weeks, signaling a potential rotation into AI hyperscalers like Alphabet and Amazon. The shift follows concerns over whether AI infrastructure spending will deliver sufficient returns to justify the outlay, prompting investors to seek broader exposure.
The Philadelphia SE Semiconductor index rose 11% in June but has since reversed gains, while the Roundhill Magnificent Seven ETF, tracking major tech firms, has partially recovered. Hyperscalers, which saw heavy selling in June, may now benefit from reduced expectations of Federal Reserve rate hikes and lower crude oil prices.
Morgan Stanley highlighted that hyperscalers have already endured a period of underperformance, positioning them for a rebound. The brokerage also noted that sectors like consumer discretionary, transport, and biotechnology could gain from the rotation away from semiconductors.