Around $2.3 trillion has been wiped off the value of the Magnificent 7 this month as the tech giant's huge infrastructure spending is increasingly scrutinized by investors, who see stronger returns in other parts of the market. The Mag 7 comprises Microsoft , Nvidia , Alphabet , Apple , Meta , Tesla and Amazon . The CNBC Magnificent 7 Index has fallen 10% so far in June. These companies, in particular Amazon, Microsoft, Alphabet and Meta, are collectively spending hundreds of billions of dollars buying chips and building data centers to power their artificial intelligence services. Some of this investment is being fueled by debt. Investors are waiting to see a return on those investments, with all eyes on the second quarter earnings season, which kicks off next month. "We are going through another 'gut check' few weeks ahead for the tech trade as tech investors await a very important 2Q earnings season in July to further validate the AI Revolution buildout," Dan Ives, managing director at Wedbush Securities, said in a note on Sunday. "In the meantime, jitters will continue as worries around the costs of this once-in-a-generation tech buildout hit its next gear of growth." Some Mag 7 names have fared worse than others. Microsoft is down 20% in June, Nvidia has fallen around 13%. Both Apple and Amazon are down by around 8%. Part of the sell-off could also be down to a lack of momentum narrative around the Mag 7. "The market is trying to understand sort of the new narrative around the Mag 7 because they went from asset-light companies that produced a lot of free cash flow, now to ones that are more balance sheet intensive," Tom Lee, head of research at Fundstrat Global Advisors, told CNBC's "Morning Call" last week. "I do think investors are going to start to view that balance sheet as a workforce. The reason they are spending so much money is to replace essentially human endeavors with AI. That balance sheet is going to be deployed and generate returns. So I think over time investors are going to start to view that as a moat ... we are in a transition period of that narrative." While some tech stocks have been hard-hit, other parts of the market have been holding up better, such as semiconductor stocks. The Philadelphia Semiconductor Index , which includes names like Taiwan Semiconductor Manufacturing Co ., Micron and ASML , is up around 6% this month. This year, it has rallied more than 90% versus a 3.4% decline for the Mag 7. Chip names have been a big beneficiary of the spending from Big Tech firms, which are buying up semiconductors and leaving them in short supply. That has had positive ripple effects on the entire supply chain, from component suppliers to manufacturers. Memory, where a supply shortage has sent prices of the component through the roof, is a key bottleneck. The Roundhill Memory ETF , which tracks memory stocks like SK Hynix and Samsung,...
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