The Magnificent Seven stocks – a group formed by Microsoft MSFT, Amazon AMZN, Apple AAPL, Alphabet GOOG, GOOGL, NVIDIA NVDA, Tesla TSLA and Meta META – posted their sharpest one-day decline since the tariff-driven market sell-off in April 2025, wiping out nearly $797 billion in market value, according to Bloomberg, as quoted on Yahoo Finance.
Alphabet and Tesla Lead the Sell-Off
Alphabet and Tesla bore the brunt of the decline, with shares falling 7% and 14.5%, respectively, after reporting quarterly earnings. Tesla alone shed roughly $200 billion in market value, per the source.
Although Alphabet delivered strong revenue growth and highlighted a growing cloud-services backlog, investors focused on its sharply higher AI infrastructure spending, triggering a sell-off in the stock.
Alphabet management has consistently told investors that it is ramping up capital spending to capture the AI opportunity. In the latest quarter, it raised its 2026 capital expenditure (capex) guidance by another $15 billion to $195 billion-$205 billion.
At that pace, Alphabet is expected to spend roughly $120 billion on capex in the second half of the year, suggesting free cash flow is likely to remain under pressure, as quoted on Yahoo Finance.
AI Spending Shifts Investor Focus
According to Evercore ISI Senior Managing Director Mark Mahaney, the market is rewarding companies that benefit from AI investment rather than those making the investments, as mentioned in Yahoo Finance.
Alphabet's higher capital expenditure reinforced the view that the AI infrastructure "picks-and-shovels" companies stand to gain the most from the AI spending boom. As a result, shares of memory-chip makers Micron Technology (MU), SK Hynix (SKHY) and Sandisk (SNDK) rallied even as hyperscaler stocks declined.
This scenario puts the focus on the Roundhill Memory ETF DRAM for potential gains. Although memory stocks were sold off massively in recent times due to high valuation, their operational fundamentals remain strong.
Meanwhile, Tesla also plans to significantly increase AI spending as it accelerates the development of autonomous robotaxis and humanoid robots, technologies that are still some distance from widespread commercialization.
How to Play the Scenario?
Focus on Compelling Valuation & Upbeat Earnings
Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company, believes investors should look beyond richly valued AI leaders and diversify into companies with stronger current earnings and more reasonable valuations, as mentioned in the above-said Yahoo Finance source.
He noted that investors should focus on businesses generating tangible earnings today rather than those whose valuations depend heavily on long-term growth expectations that may not materialize.
ETFs to Play
Defiance AI & Power Infrastructure ETF AIPO
This fund gives access to companies contributing to the critical electrical grid, AI and data infrastructure through decentralized energy technologies, electrical utilities and related components and construction, data center operations, and AI-related computing hardware.
This alternative energy and grid fund added 0.35% yesterday and is up 7% over the past week compared with the flat performance of the tech-heavy Nasdaq-100 ETF QQQ.
Global X Copper Miners ETF COPX
The fund targets copper miners. Copper is an essential metal in the AI buildout. COPX is up 7.9% over the past week.
AI servers require three to five times more power than traditional data servers, necessitating massive amounts of copper to support incredibly dense electrical grids, advanced power distribution units and massive cooling systems (read: Copper vs. Gold & Silver: Which Metal Wins the AI Boom? ETFs at Play).
Global X AI Semiconductor & Quantum ETF CHPX
The fund offers exposure to advanced chipmakers and foundational hardware manufacturers. While there are plenty of chip ETFs in the market, CHPX has a relatively lower P/E ratio.
CHPX trades at an average P/E of 45.52x compared with the iShares Semiconductor ETF (SOXX), which has an average P/E of 51.75x, per WSJ. CHPX is up 9.4% over the past week.
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Global X Copper Miners ETF (COPX): ETF Research Reports
Meta Platforms, Inc. (META): Free Stock Analysis Report
Defiance AI & Power Infrastructure ETF (AIPO): ETF Research Reports
Global X AI Semiconductor & Quantum ETF (CHPX): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).