Chips crash on bubble fears just as Goldman confirms a capital spending supercycle — long the dip on AMD and Intel
Chips stocks like Micron, Intel, and AMD just had a monster quarter — adding $2 trillion in value — but they started Q3 with a crash as analysts warned of a bubble. While the Mag 7 giants like Microsoft have been getting punished all June for overspending on AI with no return, Goldman Sachs points out that this massive capital spending is actually the fuel powering the broader bull market and the overall economy.
Idea
The rapid 5-11% drop across major chipmakers on July 1st is being driven by Bank of America flagging 'bubble risk,' but this comes just a day after Goldman Sachs highlighted that a once-in-a-generation capital spending boom is underpinning the entire bull market. The CNBC article notes the record $2 trillion rally in Q2, showing the underlying demand for chips remains structurally strong. While Yahoo Finance reports that the Mag 7 AI spend is under scrutiny for lacking ROI, that same spending is literally the revenue for these chipmakers. The violent Q3 open dip in AMD and Intel is likely a sentiment-driven overshoot rather than a fundamental breakdown in the AI buildout.
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News sources
- Chip stocks that notched record rallies in second quarter start Q3 with a dud — CNBC
- Goldman Sachs Says Capital Spending Is Powering the Bull Market — Bloomberg
- Magnificent Seven shed $2.3 trillion in June as AI spending comes under closer scrutiny — Yahoo Finance
- Intel Drops 7%, AMD Slides 5%, Taiwan Semiconductor Falls 6% as BoA Flags “Bubble Risk” — Yahoo Finance