The Magnificent Seven just hit valuations we haven't seen in over a decade, and Wall Street is finally asking the hard question: Is this a bear market, or is capital just rotating to better opportunities?

The P/E premium for the Mag 7 has collapsed to roughly 10% from the 30%+ they've commanded through most of the 2020s. NVIDIA, Microsoft, Amazon, Meta, Apple, and Tesla have all underperformed the broader market this year, only Alphabet eked out gains at +14.5% versus the S&P's +8.8%.

But here's the thing: Leadership hasn't rotated away from tech. It's rotated within tech. While the Mag 7 tread water, benchmark indices like the KOSPI are up over 100% year-to-date. SK Hynix just IPO’d today with demand running seven times the shares available. Memory, semiconductors, and infrastructure are catching bids while the mega-caps stumble.

Today:

📰 SK Hynix IPOs at $170
🤖 Meta AI chips enter production in September
🚨 Tariffs triggering wave of H2 price increases
💨 Microsoft emissions up 25% on AI data center surge

Let's get started.

This is not financial advice. Always do your own research. Past performance doesn’t guarantee future results.

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The Magnificent Seven stocks just hit their cheapest valuation relative to the S&P 500 in more than a decade, with their P/E multiple premium collapsing to ~10% from the 30%+ they've held through most of the 2020s. Only Alphabet (GOOG) has outperformed the broader market this year (+14.5% vs. the S&P's +8.8%), while NVIDIA, Microsoft, Amazon, Meta, Apple, and Tesla have all lagged.

The culprit? Wall Street is losing patience with Big Tech's astronomical capex spending on AI infrastructure, projected to balloon 70% and exceed $700 billion this year. This aggressive data center and GPU buildout has cannibalized free cash flow generation, and layered on top of potential Fed rate hikes this year, investors are suddenly pricing in execution risk. Deutsche Bank's Jim Reid put it bluntly: "There is growing apprehension regarding the capex spend by the largest hyperscalers." Leadership in the market has rotated away from the Mag 7 entirely; benchmark indices like the KOSPI are up over 100% year-to-date while the mega-caps tread water.

Our take:

We've been beating the abundance and AI-buildout drum for a while, so no surprise: we read this as just a rotation, not a reckoning.

Sure, nobody's proven the return on all this AI spending yet, and sure, watching hundreds of billions in free cash flow vanish into data centers stings. But demand for compute isn't slowing, and the money leaving the Mag 7 isn't leaving the market. It's moving one row over, into memory, the chip supply chain, and the names actually selling the picks and shovels (hello, KOSPI). The reflex is to buy the dip on the giants or bail on tech entirely. We'd do neither on autopilot. The real question is which businesses are catching the capital the Mag 7 is spending, because a cheaper Nvidia is still a crowded trade, while a sold-out memory cycle is a different animal.

US stocks climbed Thursday as semiconductor stocks rallied ahead of SK Hynix's highly anticipated Nasdaq debut, with investors setting aside fresh US-Iran tensions.

Memory chip stocks led the charge with Micron surging more than 4%, Sandisk popping 5%, and Western Digital, Marvell, and Broadcom all trading higher. The rally comes as South Korea’s SK Hynix IPO’d today, rising 17.5% to touch $175 briefly. Micron also announced plans to invest up to $3 billion to bolster the US semiconductor supply chain, including a 10-year supply agreement with GlobalWafers for raw silicon wafer capacity.

Oil prices reversed sharply lower even as the US and Iran traded fresh attacks that put their fragile truce to the test. American forces struck 90 Iranian targets overnight, and Iran retaliated by hitting US-allied positions across the Middle East. Despite the escalation, Brent crude fell 2.5% as markets bet the fighting won't spiral into a broader conflict that disrupts oil flows. West Texas Intermediate dropped below $70 per barrel.

Companies aren't done raising prices because of tariffs, according to new research from the New York Fed. The bank found that 47% of service firms are planning additional tariff-related price increases, including 31% within the next six months. Manufacturers are in the same boat, with 44% planning hikes. Some companies are employing a "trickle up" strategy, raising prices slowly over time to avoid sticker shock while recouping tariff costs. The Fed noted that last year, American companies and consumers paid for nearly 90% of the tariffs despite promises that exporters would bear the burden.

Meta's custom AI chips will begin production in September, according to an internal memo obtained by Reuters. The company is working with Broadcom on chip design and TSMC for manufacturing, with at least one chip clearing its testing phase in about six weeks. Meta expects the chips to help reduce its GPU spending with Nvidia and AMD, though it still plans to buy plenty from those providers. The social media giant is projecting $125 billion to $145 billion in capital expenditures this year, much of it going toward AI infrastructure. Meta plans to deploy 7 gigawatts of compute this year and double that next year.

PepsiCo's results showed American consumers are tightening their budgets due to economic concerns, even as the drinks maker's revenue topped expectations. The report offers a fresh read on the state of consumer spending as tariff costs continue working through supply chains.

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Cheers,
Brandon & Blake of Invested Inc