The seven largest companies in the S&P 500 saw their combined market capitalization drop by $4T since Oct 15 as investors exited crowded AI trades in favor of defensive sectors. This shift has hit the Semiconductor Index particularly hard, which fell more than 30% since June and dropped below its 200 day moving average for the first time in a year, reflecting growing skepticism over the returns on AI buildouts.
The volatility is occurring while the broader S&P 500 remains within 3% of its all time high, though Goldman Sachs reports that 60% of the index’s constituents are currently in bear market territory. As hyperscalers increasingly rely on financing to cover declining cash flows, corporate debt has climbed; Amazon’s long term debt grew to $173B from $66B in a 9 month period, while the spread for B and CCC rated bonds widened to about 8%.
