AI's Biggest Winners Are Selling Off, and ETFs Are Behaving Strangely
Sumit RoyThu, July 30, 2026 at 1:57 AM GMT+3 2 min read
The biggest winners of the AI trade have turned volatile, and that volatility is creating some unusual dynamics across the ETF landscape. After an extraordinary run in the second quarter, semiconductor stocks have been hit hard in the third as investors take profits and start to worry about when the cycle finally peaks.
The iShares Semiconductor ETF (SOXX) has fallen 27% since it hit an all-time high on June 22. The damage hasn't stayed contained to chips, either. Some of the Magnificent Seven stalwarts have struggled alongside them, with Alphabet, Meta, and Amazon all under pressure.
That combination has dragged the tech-heavy Invesco QQQ Trust (QQQ) sharply lower, and it's now down about 10% from its highs. The Technology Select Sector SPDR Fund (XLK) has fared even worse, off more than 14%.
On the other hand, the broader market, and especially stocks that sit outside of tech, have held up far better, and in some cases have kept climbing. The Vanguard S&P 500 ETF (VOO) is down just 3% from its high, even with the double-digit declines in QQQ and XLK.
Tech carries the heaviest weighting in the S&P 500, but other sectors have absorbed the blow. The Invesco S&P 500 Equal Weight ETF (RSP), which weights every S&P 500 stock equally and blunts the influence of tech, illustrates this well. It hit an all-time high on Tuesday, the same session that semiconductor stocks got pounded and QQQ dropped close to 1%.
Still, despite the volatility in tech, this looks like an ordinary pullback so far, even if a violent one. On a year-to-date basis the AI and semiconductor trade is still doing extremely well.
SOXX is up 58%, XLK is up 18%, and QQQ is up 10%. All three are beating VOO, which sits closer to 9%. RSP is the standout. Its 14% gain is beating both VOO and QQQ.
That said, while RSP is doing well in 2026, equal weighting the S&P 500 has underperformed for years. The biggest of the big kept getting bigger, and any strategy that trimmed them fell behind.
This year that has flipped. With most of the Mag 7 lagging, tilting smaller has actually helped. Semiconductors have been phenomenal year to date, but the megacap giants like Alphabet, Amazon, Meta, and Tesla have not kept pace.
The one standout among the giants has been Apple, which hit an all-time high this week. It's a little bit ironic, since it's the only one of the group not spending aggressively on the AI capex boom.
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