Tech stocks on pace for best 6 months since 2023 — even with much of the 'Magnificent 7' in the 'penalty box': Chart of the Day

Technology stocks are on pace for their best first half since 2023, rallying 28% year to date, driven by AI infrastructure investments despite underperformance from the 'Magnificent Seven' megacap stocks. Investors have shifted focus to AI component makers like Micron and Intel, while Big Tech firms face scrutiny over massive AI spending.

Tech stocks on pace for best 6 months since 2023 — even with much of the 'Magnificent 7' in the 'penalty box': Chart of the Day The Technology XLK https://finance.yahoo.com/quote/XLK sector is on pace to notch its strongest first half of the year since 2023, when the AI boom first drove equities significantly higher. The sector has rallied roughly 28% year to date as investors piled into the companies building the infrastructure behind the AI boom. Much of those gains have come since the market bottomed on March 30 as the US-Iran conflict wreaked havoc on stocks. Tech stocks have soared 37% since then, with the Energy XLE https://finance.yahoo.com/quote/XLE/ and Industrials XLI https://finance.yahoo.com/quote/XLI sectors following. The V-shaped recovery over the past two months has put the broad-based S&P 500 ^GSPC https://finance.yahoo.com/quote/^GSPC/ index on track for its best quarter in six years. But while the "Magnificent Seven" megacap stocks were the drivers of the tech sector three years ago, their performance in 2026 has been anything but magnificent. If anything, Big Tech players that plan to spend more than $650 billion https://finance.yahoo.com/sectors/technology/article/big-techs-second-quarter-just-started-and-its-already-facing-major-challenges-103340081.html on AI this year have been punished, as the returns on those investments remain hazy. "Investors seem to be experiencing AI Fatigue," veteran strategist Ed Yardeni wrote in a recent note. "They are questioning whether the hyperscalers' massive spending on AI infrastructure will ever pay off." Read more: How to protect your portfolio from an AI bubble 'A bifurcated market' Software and cloud provider Microsoft MSFT https://finance.yahoo.com/quote/MSFT is down 22% since the start of the year and is about to close out its worst month since the year 2000. Meanwhile, social media giant Meta META https://finance.yahoo.com/quote/META/ is also down 14% over the past six months. Alphabet GOOG https://finance.yahoo.com/quote/GOOG/ , GOOGL https://finance.yahoo.com/quote/GOOGL/ , Apple AAPL https://finance.yahoo.com/quote/AAPL , and Nvidia NVDA https://finance.yahoo.com/quote/NVDA are up 12%, 4%, and 3% respecivetly. "Those are the ones that are all almost getting put in the penalty box with a lot of them getting treated like bear market stocks," Dan Ives, managing director and senior equity research analyst at Wedbush Securities, told Yahoo Finance on Monday. "I think right now, you're really seeing a bifurcated market," he added. But investors have been more enthusiastic about companies that make critical AI components than about the big spenders. Highfliers include memory, storage, and chip plays like Micron MU https://finance.yahoo.com/quote/MU , Western Digital WDC https://finance.yahoo.com/quote/WDC , Seagate STX https://finance.yahoo.com/quote/STX , and Intel INTC https://finance.yahoo.com/quote/INTC/ , which have all risen more than 200% since the start of the year, sending the iShares Semiconductor ETF SOXX https://finance.yahoo.com/quote/SOXX up a whopping 100% year to date. If those gains hold for the rest of the year, it would take out 2003 as the best year for the index on record. Investor appetite for IPOs has also remained strong, highlighted by SpaceX's SPCX https://finance.yahoo.com/quote/SPCX/ record-breaking public debut after the Elon Musk-led company raised more than $75 billion https://finance.yahoo.com/video/spacex-raises-75b-in-historic-ipo-valued-at-177-trillion-133425218.html . AI developer Anthropic ANTH.PVT https://finance.yahoo.com/quote/ANTH.PVT/ is also expected to go public this year. OpenAI OPAI.PVT https://finance.yahoo.com/quote/OPAI.PVT/ has filed for an IPO, though a recent report said the company could delay its debut as it seeks to reach a $1 trillion valuation.