AI trading slump sweeps tech stocks: ON Semiconductor plunges 24%, Oracle posts the biggest weekly drop since 2001, the “Magnificent Seven” all fell for the week.

AI trading has experienced its most intense cooling this year.

As investors begin to reassess whether massive capital expenditures on AI infrastructure can deliver sufficient returns, the U.S. tech sector has faced a widespread sell-off this week. Oracle recorded its largest single-week drop since the trough of the dot-com bubble in 2001. ON Semiconductor (onsemi) saw its stock plunge nearly 24%, its biggest single-day decline since 2020, after announcing a $7 billion acquisition of Synaptics to enter the physical AI space, sparking market concerns.

This Friday, as oil prices fell, sectors such as energy, healthcare, and consumer goods in the U.S. stock market remained relatively resilient. However, AI-related stocks continued to be the biggest drag, with the Philadelphia Semiconductor Index dropping over 5% in a single day and nearly 8% for the week, marking one of the worst weekly performances this year. The Nasdaq index remained under pressure. Non-AI-related S&P 500 components posted an overall gain of over 2% for the week.

Although five major companies like Microsoft rebounded on Friday, all of the "Magnificent Seven" tech giants, including Nvidia, still recorded weekly losses. SpaceX fell over 17% in its second week of trading, wiping out all gains from its debut week. AI trading is undergoing a broad and sharp valuation reassessment.

Goldman Sachs' index tracking TMT blue-chip tech stocks recorded its largest weekly drop since April last year, when the Trump administration announced global reciprocal tariffs.

Oracle records largest weekly drop since the trough of the dot-com bubble

In this sell-off, Oracle, which had surged on the AI data center narrative, became a major casualty.

Oracle closed down nearly 2.6% on Friday, with a weekly loss of 19.4%, marking its largest single-week decline since August 2001.

Previously, Oracle had driven its market cap higher through repeatedly upgraded data center construction plans and massive AI cloud orders. But the market has recently begun to focus more on a core question: when will the continuously rising capital expenditures translate into profits and free cash flow?

Investors worry that, amid the escalating AI infrastructure race, hyperscale data center construction requires sustained massive capital investments, while future customer demand, GPU supply, and the pace of profit realization remain highly uncertain. This has led to profit-taking hitting software and cloud computing companies that had seen rapid valuation expansion.

ON Semiconductor announces $7 billion acquisition of Synaptics, stock sees biggest daily drop in nearly six years

The chip sector also took a heavy hit.

ON Semiconductor announced it would acquire Synaptics for approximately $7 billion, aiming to strengthen its position in human-machine interaction, edge AI, and smart terminal fields.

ON Semiconductor stated that the acquisition targets the "physical artificial intelligence" (physical AI) field, and the transition could expand its total addressable market by $30 billion, projecting a total market size of $243 billion by 2030.

However, capital markets reacted strongly to the deal. ON Semiconductor's stock closed nearly 24% lower on Friday, recording its biggest single-day drop since October 2020 and becoming one of the worst-performing components in the S&P 500.

Key investor concerns include:

• The $7 billion transaction size means the company will face higher financial pressure;
• The market worries that integration risks are high and may drag on profitability in the short term;
• The current valuation correction across the semiconductor industry makes investors more inclined to reduce risk exposure.

Against the backdrop of overall valuation declines in the AI supply chain, even large-scale mergers with long-term strategic significance struggle to gain market approval.

AI trading cools broadly, all "Magnificent Seven" end the week in the red

Super blue-chip tech stocks were not spared. As of Friday's close:

• Alphabet closed down about 2.2%, falling for five consecutive trading days to a low not seen since April 21, down 8.92% for the week;
• Nvidia closed down 1.64%, also falling for five consecutive days to a low since April 13, down 8.62% for the week;
• Apple, which had fallen for four consecutive days through Thursday, closed up 3.14%, but still down 4.77% for the week;
• Microsoft, which had fallen for two consecutive days, closed up 5.7%, ending its correction, but still down 1.69% for the week;
• Amazon, which fell over 3% on Thursday, closed up 2.5%, down 4.79% for the week;
• Meta, which had fallen for four consecutive days, closed up nearly 1.4%, down 4.67% for the week;
• Tesla, which had fallen for three consecutive days, closed up 1.22%, down 5.19% for the week.

This means all of the so-called "Magnificent Seven" recorded weekly losses, ending their months-long streak of leading U.S. stock gains.

Market analysts note that AI trading has recently seen a clear cooldown, with investors beginning to refocus on valuations, profit realization, and cash flow, rather than just the long-term AI growth narrative.

SpaceX drops over 17% in second week of trading, erasing first-week gains

SpaceX, the most closely watched new stock recently, also could not escape.

The company's stock edged up only 0.15% on Friday, but fell 17.17% over its second full trading week, essentially wiping out the 14.94% cumulative gain from its first full trading week.

The rapid cooling of the initial hype is also seen by the market as a microcosm of declining risk appetite for growth stocks. With the overall valuation correction in the AI sector, newly listed tech companies also face greater profit-taking pressure.

AI capital expenditure begins to face a "profitability test"

Analysts believe the core logic behind this tech stock adjustment is not that AI demand has vanished, but that the market has shifted from "growth at all costs" to a focus on "returns."

Over the past year, tech giants like Microsoft, Alphabet, Meta, Amazon, and Oracle have continuously increased capital expenditures to build AI data centers, purchase GPUs, and expand cloud infrastructure. But as capital investments keep setting new records, more investors are questioning when these investments will truly drive profit growth.

Meanwhile, the entire AI supply chain, including memory chips, GPUs, servers, and software, had previously experienced rapid valuation expansion. Once market risk appetite declines, concentrated profit-taking can easily trigger a sector-wide correction.

Multiple institutions believe that the market is not denying the long-term AI growth logic but is undergoing a round of valuation repricing. Going forward, the key to stock performance will depend more on whether companies can prove that massive AI investments can consistently translate into revenue growth, profit improvement, and cash flow enhancement, rather than relying solely on capital expenditure narratives to support valuations.

Risk Disclosure and Disclaimer

        Market risks exist, and investment requires caution. This article does not constitute personal investment advice, nor does it consider the specific investment objectives, financial situations, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Invest accordingly at your own risk.