$2.3 trillion wiped out from Microsoft, Nvidia, Alphabet, Apple, Meta, Tesla and Amazon

Tech’s elite “Magnificent 7” – which tracks Microsoft, Nvidia, Alphabet, Apple, Meta, Tesla and Amazon – has got a reality check after a staggering $2.3 trillion in market value was erased from the group’s stocks this month, a report has said, adding that the index plunged 10% in June.

According to a report by CNBC, the losses have been uneven across the board, with some tech giants taking harder hits than others. For example, while Microsoft was down 20% this month, Nvidia fell by roughly 13%. Apple and Amazon were down about 8% each.The sell-off comes as tech giants pour hundreds of billions of dollars into high-end microchips and data centres to fuel their AI products, with a notable portion of this spending funded by debt.

The report said that investors are now tired of the hype, and are demanding to see concrete financial returns on these massive investments.

‘Gut check’ awaits: Analysts remain positive

Citing market analysts, the report says that the downturn reflects a shift in how the stock market views Big Tech. For years, these giants were praised for being “asset-light” businesses that generated piles of free cash flow with minimal overhead. Now, they are transforming into heavy infrastructure businesses.

Dan Ives, the tech bull and managing director at Wedbush Securities, warned clients that the industry is entering a high-stress transition phase. “We are going through another ‘gut check’ few weeks ahead for the tech trade as tech investors await a very important 2Q earnings season in July to further validate the AI Revolution buildout,” Ives wrote in a note to investors.With trillions hanging in the balance, all eyes are locked on the upcoming earnings season.

The financial reports will force tech companies to prove that their AI investments are actually driving revenue.“In the meantime, jitters will continue as worries around the costs of this once-in-a-generation tech buildout hit its next gear of growth,” he added.Meanwhile, Tom Lee, head of research at Fundstrat Global Advisors, told CNBC: “The market is trying to understand the new narrative around the Mag 7 because they went from asset-light companies to ones that are more balance sheet intensive.”However, Lee believes this transition is actually a long-term win.“The reason they are spending so much money is to replace essentially human endeavors with AI. That balance sheet is going to be deployed and generate returns. Over time, investors are going to start to view that as a moat,” Lee noted.