S&P 500 Falls 1.6% as AI Rotation Shifts Capital From Chips to Hyperscalers

According to CNBC Investing Club, the AI infrastructure trade saw a sharp rotation last week (July 11-17), with investors shifting capital from semiconductor makers to hyperscalers, driving major market moves. The S&P 500 fell 1.6% for the week while the Nasdaq declined nearly 3%. The VanEck Semiconductor ETF (SMH) dropped 9%, with memory giant SK Hynix falling 9% following its U.S. debut on July 10, triggering broad selling across the chip sector including Sandisk (down 12%), Intel (down 6%), and AMD (down 4%).

The rotation accelerated after IBM pre-announced disappointing second-quarter results on Tuesday, with CEO Arvind Krishna citing customers redirecting budgets toward cybersecurity, hardware, and AI infrastructure rather than traditional software. IBM shares fell 26% for the week. The shift benefited cybersecurity names CrowdStrike and Palo Alto Networks, which rallied 12% and 7% respectively, while cloud giants Apple, Amazon, and Microsoft all finished the week higher.