Wall Street experienced a comeback as dip buyers emerged, propelling stocks higher amidst renewed enthusiasm for artificial intelligence and expectations of a strong economy bolstering Corporate America. High-profile chipmakers, including Nvidia Corp. and Micron Technology Inc., spearheaded these gains, climbing 5.6% after their most significant selloff since 2020. This rebound was sufficient to push the S&P 500 to resume its advance from earlier lows, even as most of its constituent companies declined. The Nasdaq 100 also saw an increase of 1.6%.
However, investor reaction to Apple Inc.'s next-generation AI platform was muted, with the company's shares dropping by 1.9%. The rally in chip stocks has been a significant driver, with some analysts noting a divergence in performance between chipmakers and hyperscalers (like Amazon, Alphabet, Meta, and Microsoft). These hyperscalers are projected to spend as much as $725 billion on capital expenditures this year for AI, with Goldman Sachs estimating their AI capex to surpass the GDP of major economies like Japan by the end of the decade.
JPMorgan strategists highlighted the "spectacular revision" in hyperscalers' 2026 plans as a major trigger for chipmakers' outperformance, noting that AI capex spending plans among the largest firms are on track to soar 100% year-over-year. The Philadelphia Semiconductor Index recently posted its best-ever quarter, surging a record 88% in the second quarter. In contrast, the Magnificent Seven stocks have underperformed, with the Roundhill Magnificent Seven ETF tumbling from its May peak and every stock in the group lagging the Nasdaq 100's 16% gain this year.
