{"text":[[{"start":10.65,"text":"The Magnificent Seven group of megacap tech stocks has shed more than $2.3tn of value this month, in a violent rotation away from companies spending hundreds of billions of dollars on AI infrastructure and towards the chipmakers benefiting from their largesse."}],[{"start":26.55,"text":"The group — Nvidia, Meta, Apple, Microsoft, Alphabet, Amazon and Tesla — has dropped 10 per cent in June, leaving it on course for its worst month in more than a year, and is down 3 per cent for the first half of this year."}],[{"start":41.15,"text":"Investors are increasingly questioning whether the enormous spending commitments by the big so-called hyperscalers, in particular Meta, Amazon, Microsoft and Alphabet, will translate into sufficient profits to justify their huge share price gains of recent years. In addition, their margins face a squeeze from the rising costs of components such as memory chips and electrical equipment."}],[{"start":63.55,"text":"In contrast, the Philadelphia Semiconductor Index, which tracks US chipmakers, has soared 93 per cent in the first half of this year, putting it on track for its best year since the height of the dotcom boom in 1999, as hyperscalers’ relentless demand for hardware and constrained supply send profits soaring. "}],[{"start":83.3,"text":"“We are not [investing in] any of the Mag 7, apart from a bit of Nvidia,” said Simone Ragazzi, a global equity portfolio manager at investment firm Algebris. “The market is questioning if and when these strong investments will translate into faster revenue growth."}],[{"start":100.19999999999999,"text":"“But we are very long in the companies seeing the benefit of this spending — infrastructure, cooling, cables, connectors,” he added. “These companies are off the charts. It won’t last for ever, but it’s difficult to stay out of these names.” "}],[{"start":null,"text":"
"}],[{"start":114.64999999999999,"text":"Chip and memory stocks have been the strongest performers in the S&P 500 this year. Sandisk has climbed around 760 per cent while Micron, Intel, Western Digital and Seagate Technology have all more than tripled, with memory shortages expected to last into 2028."}],[{"start":132.5,"text":"Shares in Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced semiconductors, have risen about 50 per cent so far this year, pushing its market value above $2tn, while its key equipment supplier, Netherlands-based ASML, is up 60 per cent."}],[{"start":149.5,"text":"The Magnificent Seven have dominated US and global stock market returns in recent years, adding $15tn to their combined market value from the start of 2023 to the start of 2026 and last year accounting for more than one-third of the total market capitalisation of the S&P 500 index."}],[{"start":170,"text":"But concerns about the hundreds of billions of dollars that some of the companies are spending on AI infrastructure each year have prompted a shake-up of Wall Street’s tech trade, as investors switch to bets on the companies benefiting from that spending. "}],[{"start":184.15,"text":"Vincenzo Vedda, chief investment officer at DWS, describes it as a “shift in market leadership” away from the “software and internet-heavy group of recent years, the Magnificent 7” towards semiconductors."}],[{"start":196.9,"text":"“The big question mark is: will these [Big Tech] players be able to monetise these investments at scale?” said Vincent Mortier, chief investment officer at Amundi. “The jury is out to be honest. Some cautiousness should be warranted.”"}],[{"start":211.3,"text":"He added: “The companies who supply key components . . . they will continue to benefit from it, whatever the outcome of monetisation.”"}],[{"start":218.95000000000002,"text":"But even beyond the tech sector, all of the Magnificent Seven stocks bar Alphabet have performed worse than the broader S&P 500 this year so far, a marked change after years of outperformance, with Microsoft, Meta and Tesla down double-digit percentages. "}],[{"start":234.95000000000002,"text":"The Magnificent Seven “are becoming more different than they are similar”, said Giles Parkinson, head of equities at investment firm TrinityBridge, adding that the hyperscalers were “where the more consistent weakness has been” because “they are the ones spending, to the benefit of the physical names”."}],[{"start":251.8,"text":"Uncertainty over when returns from AI might be realised has come to the fore, in both the Big Tech companies’ core software and cloud computing businesses, as well as their huge investments in OpenAI and Anthropic, which have both signalled their intentions to go public in what could be trillion-dollar listings."}],[{"start":269.5,"text":"Over recent weeks several prominent early AI adopters, including Walmart, Uber and Meta, have reined in staff usage of the technology or adjusted their approach after receiving huge bills. That has made some investors nervous that Big Tech’s AI revenues could be hit by customers switching to cheaper models or curtailing spending."}],[{"start":289.2,"text":"Nonetheless, the US hyperscalers are pressing ahead with plans to spend close to $1tn on data centres to serve AI demand, which currently exceeds supply. Companies including Meta and Microsoft have already warned that skyrocketing memory prices and other rising component costs are pushing that bill higher, making extra capacity even more expensive to build."}],[{"start":310.3,"text":"Last week Apple announced price rises of about 20 per cent for MacBooks and iPads, citing the “unprecedented challenge” of rising memory prices. Microsoft also increased its Xbox games console prices, warning that memory costs had doubled in the space of a few months and would be likely to double again by late 2027."}],[{"start":330.5,"text":"Data visualisation by Ray Douglas"}],[{"start":343.2,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1782802364_6054.mp3"}