AI’s rally is disguising a massive slump in tech stocks

Chipmakers Are Carrying the Market While Big Tech Bleeds

Sandego.net – The S&P 500 has climbed 13% so far this year, injecting approximately $7.6 trillion into aggregate market capitalization. Yet beneath that headline number sits a startling concentration: semiconductor equities have generated 37% of all those gains, according to Mike O’Rourke, chief market strategist at JonesTrading. The sector now represents close to one-third of the index’s total market value, per data from investment bank Stifel, while chip and tech-hardware names collectively occupy nearly 45% of the Nasdaq 100. In practical terms, the rally that defines 2026’s equity market is being powered almost entirely by the companies selling the hardware layer of the artificial-intelligence buildout.

Nvidia’s Earnings Reset the Tone

Thursday’s session underscored the shift. Nvidia (NVDA) shares jumped 9% after the company posted results in which revenue doubled year-over-year and management projected continued blockbuster growth. The Nasdaq Composite gained 1.57% in midafternoon trading, and the broader S&P 500 added 0.82%. Intel and other semiconductor peers followed higher, riding the same supply-chain tailwind that positions them as essential vendors to hyperscale data-center construction.

The contrast with the previous market leadership cohort is stark. Microsoft, Meta, and their peers have spent the trailing twelve months hemorrhaging value as they commit tens of billions of dollars to AI infrastructure capex. Microsoft shares have slipped roughly 6% since printing an all-time high in October of last year. Alphabet and Amazon remain below their recent peaks. Apple, which has been trading sideways for weeks, is still down close to 7% from a record set earlier this month.

The “Picks and Shovels” Trade Goes Global

The companies supplying the physical substrate of AI — accelerators, memory, networking gear, and the services that assemble data centers — are capturing the upside of the investment cycle. Micron Technology (MU) is up 220% over the past twelve months and crossed the $1 trillion market-cap threshold in May, elevating it to the ninth-largest constituent of the S&P 500. The memory-chip maker’s latest report showed a 346% surge in sales, a figure that has investors repricing the entire storage-and-compute complex.

The phenomenon is not confined to the United States. In South Korea, SK Hynix and Samsung Electronics have propelled the benchmark Kospi index to gains exceeding 120% year-to-date, a move that has drawn renewed foreign inflows into a market long considered value-trapped.

Concentration Risk: What Happens If the Chip Trade Wobbles

When a single sector supplies the majority of an index’s upside, the index inherits that sector’s fragility. James Reilly, senior markets economist at Capital Economics, laid out the arithmetic plainly in a client note:

“If the new market leaders, semiconductor firms, also start to struggle, the stock market would be in big trouble.”

The warning is not hypothetical. In early June, Broadcom — another heavyweight in the semiconductor complex — delivered earnings in which its third-quarter chip-revenue guidance came in marginally below consensus. The reaction was swift and severe: shares fell nearly 20% over the following two sessions. The episode demonstrated how quickly sentiment can rotate when the bar for earnings expectations is raised high enough that any miss registers as a structural break rather than a rounding error.

Echoes of the Dot-Com Mania

Thomas Carroll, equity market strategist at Stifel, drew an explicit parallel to the late-1990s technology frenzy in a recent note, arguing that the current AI trade — with its semiconductor-chip proxies — carries the same speculative architecture: a narrow set of beneficiaries absorbing outsized capital flows while the broader economy’s productivity gains remain unproven. Carroll said he remains long the names but keeps his “eyes wide open” to a potential sentiment reversal, particularly if hyperscaler capex on AI infrastructure shows measurable deceleration. A slowdown in that spending would compress chipmakers’ forward revenue visibility and could unwind the premium embedded in their multiples.

Cracks in the Cart

Matt Maley, chief market strategist at Miller Tabak + Co, offered a more measured read. He acknowledged that visible stress points have appeared over the past year but argued they have not yet destabilized the broader tape:

“We have seen other cracks over the past year… and they have not upset the apple cart for very long. So, it would be foolish to try to say that the AI bubble is about to burst.”

He added, however, that investors should monitor how those fissures evolve:

“However, it is still important to point out that these cracks have indeed appeared… and thus investors will want to keep a close eye on how these developments proceed going forward.”

The practical takeaway for portfolio managers is straightforward: the index-level rally is real, but its composition is narrow. A market in which one hardware sector supplies more than a third of all gains is a market where a single earnings miss, a capex revision, or a macro shock aimed at compute demand can compress valuations across the board. The question is no longer whether chipmakers will keep outperforming in the near term — Thursday’s session confirmed they will — but how much additional upside remains before the concentration itself becomes the dominant risk factor.