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Pro: 'Mag 7' decline
The "Magnificent Seven" tech giants—Microsoft, Nvidia, Alphabet, Apple, Meta, Tesla, and Amazon—collectively lost about $2 trillion in market capitalization in June, despite sitting on a combined valuation of $21.7 trillion as of Tuesday's close. The Roundhill Magnificent Seven ETF (MAGS), which tracks these stocks equally, fell 9% in June, its second-worst month since its 2023 launch, only surpassed by March 2025's 10.5% decline. Investors are reassessing the case for these once-unbeatable mega-caps as they shift from being cash-rich to heavy spenders, devoting most of their cash to the artificial intelligence race. Apollo Global Management chief economist Torsten Slok noted that free cash flow for Meta, Alphabet, Microsoft, and Amazon fell sharply from their 2024 peak into 2026. With AI spending projected to exceed $700 billion this year, soaring capital expenditures have raised concerns among investors who relied on sizable buybacks as a buffer. Gene Munster of Deepwater Asset Management told CNBC's "Fast Money" that the focus is on company leadership’s competence and long-term understanding of AI investments, which could lead to accelerating revenue growth and returns. All seven stocks were in the red in June: Microsoft fell 17% (its biggest monthly drop since December 2000) after projecting capital spending could reach $190 billion in 2026 due to soaring memory prices. Amazon declined 12%, Meta 11%, Apple 7.3%, while Alphabet, Nvidia, and Tesla fell 6%, 5.2%, and 3.5%, respectively. Some on Wall Street view the pullback as overdone. Bank of America remained bullish on hyperscalers like Amazon and Alphabet, as well as Oracle (not a Mag 7 member). Meanwhile, the semiconductor sector surged: the iShares Semiconductor ETF (SOXX) rose 113% in the first half of the year, compared to MAGS' 2.5% loss, indicating investors are rewarding chipmakers while penalizing those paying for AI infrastructure.