MUMBAI: The AI gold rush has hit its first reality check, and Wall Street is asking whether the bill will ever match the bounty. Investors slammed the world’s biggest technology companies in June, wiping a combined $2.3 trillion off the market value of the so-called Magnificent 7, even as the firms powering the AI boom raced ahead.
According to a CNBC report, investors have grown increasingly uneasy over the scale of artificial intelligence infrastructure spending by Microsoft, Nvidia, Alphabet, Apple, Meta, Tesla and Amazon, questioning whether billions of dollars in AI investments will ultimately translate into sustainable profits.
The sell-off comes as the world’s largest technology companies continue to pour unprecedented sums into AI data centres, chips and computing infrastructure, much of it financed through corporate borrowing. While the spending has fuelled optimism around AI’s long-term potential, it has also intensified scrutiny over returns on investment.
Ironically, while AI’s biggest backers stumbled, the companies supplying the technology behind the boom emerged as clear winners.
The Philadelphia Semiconductor Index has surged more than 90 per cent so far this year, including a 6 per cent gain in June, comfortably outperforming the broader Magnificent 7 index, which is down 3.4 per cent year-to-date.
Among the biggest beneficiaries are Taiwan Semiconductor Manufacturing Company (TSMC), which manufactures advanced AI processors, ASML, the supplier of extreme ultraviolet lithography machines essential for cutting-edge chip production, and memory giants SK Hynix and Samsung Electronics, both benefiting from soaring demand for high-bandwidth memory and stronger pricing.
The rally has extended across the broader semiconductor ecosystem. The Roundhill Memory ETF, which tracks companies including SK Hynix and Samsung Electronics, has jumped 166 per cent this year as AI-driven demand for advanced memory chips accelerated.
Attention is now turning to the second-quarter earnings season in July, where investors are expected to closely examine whether the technology giants’ enormous AI investments are beginning to generate meaningful revenue and profit growth.
Dan Ives, managing director at Wedbush Securities, described the coming weeks as another critical “gut check” for the technology sector, noting that investors are waiting for earnings to validate the next phase of the AI revolution. Until then, concerns over the rising cost of building AI infrastructure are likely to keep market volatility elevated.