Chip Stocks Surge 88% While Mag 7 Slumps Into Correction
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- PHLX Semiconductor Index (SOX) has gained 88% so far in 2026, putting it on pace for its best year since the dot-com bubble in 1999.
- The Magnificent Seven (Alphabet, Meta, Amazon, Apple, Microsoft, Nvidia, Tesla) have fallen 4% year-to-date in 2026, with the Roundhill Magnificent Seven ETF (MAGS) officially slumping into correction territory — a drop of at least 10% from its recent peak.
- The rolling 26-week correlation between SOX and the Magnificent Seven has plummeted to its lowest level since late 2021, according to Ned Davis Research analysts Pat Tschosik and Philippe Mouls.
- The last time this correlation broke down — a bottom in September 2021 — the Mag 7 cap-weighted index peaked in November 2021 and the SOX peaked in December 2021, with the S&P 500 then entering a lengthy bear market in early 2022 that produced its worst calendar-year performance since 2008.
- As of mid-June, the SOX had outperformed the Bloomberg Magnificent Seven Index by over 100 percentage points on a 26-week basis.
- Ned Davis Research called the divergence 'unsustainable' because the Mag 7 funds much of semiconductor demand through AI capex, with hyperscalers pouring hundreds of billions into AI infrastructure that siphons free cash flow and has begun spooking investors about return on investment.
Why it matters: Ned Davis flagged the divergence as 'unsustainable' because the Mag 7's hundreds of billions in AI capital expenditure are the primary source of chip demand — so a Mag 7 rollover would directly undercut the SOX's 88% gain. The historical analogue is stark: a near-identical correlation breakdown in late 2021 preceded the S&P 500's worst year since 2008, meaning the current setup carries outsized tail risk if the two groups suddenly reconverge.
