M7 Market Cap Wipes Out 3.4 Trillion Won in a Month as Semiconductors Take the Lead

[Financial News]  

The market capitalization of the once "miraculous" M7 tech stocks that had led the New York Stock Exchange (NYSE) was found to have evaporated by more than $2.2 trillion, or about 3.4 quadrillion won, in June alone. The money that left those seven tech giants appears to have flowed into semiconductors.
While M7 struggled, semiconductors took off.

The Financial Times reported on June 30 local time that M7 tech stocks plunged by nearly 10% over the month. For the first half of the year as a whole, they fell 2%.
M7 refers to the seven major tech stocks: NVIDIA, Alphabet Inc., Apple Inc., Microsoft (MS), Amazon, Tesla and Meta Platforms Inc. Excluding Apple, they are at the center of the AI boom, but they have recently been under pressure as concerns over heavy AI investment have resurfaced.
Investors sold off these stocks, doubting whether the massive data center spending by the so-called hyperscalers, including Alphabet, Amazon, Microsoft and Meta, would generate enough profit to justify their recent stock surges.
Rising costs for related components such as memory semiconductors and electronic equipment also weighed on margins and added to the pressure.
These companies have dominated U.S. and global stock markets in recent years, sending their share prices soaring. From 2023 through early this year, their combined market value rose by as much as $15 trillion. Last year, they accounted for more than one-third of the total market capitalization of the Standard & Poor's 500 Index (S&P 500 Index).

By contrast, semiconductors have been on the rise.
The iShares Semiconductor ETF (SOXX), a semiconductor exchange-traded fund, has surged more than 110% so far this year, while the Philadelphia Semiconductor Index is up nearly 100%.
The Philadelphia Semiconductor Index is on track for its best year since the dot-com boom in 1999.
Simon Ragazzi, global equity portfolio manager at Algebris, said, "I am not investing in any M7 names except NVIDIA," adding, "The market is questioning whether the heavy investment now underway will translate into rapid revenue growth."
Ragazzi added, "We are aggressively buying stocks that benefit from their spending, such as infrastructure, cooling, cables and connectors," and said, "These names have completely broken out on the charts. This trend will not last forever, but it is impossible to ignore."
Vincenzo Vedda, Chief Investment Officer (CIO) at DWS Group, described the current trend as a "shift in market leadership" and said the focus is moving from the software- and internet-heavy M7 group to semiconductors.
Vincent Mortier, CIO at Amundi, said, "The key question is whether these big tech companies can generate cash from large-scale investment," adding, "The jury is out. Some of the concerns should be taken seriously."
Mortier added, "Companies supplying key components will remain beneficiaries regardless of the cash conversion outcome."

[email protected] Song Kyung-jae Reporter