#夏日创作营 U.S. stocks show extreme polarization as inflation cools: Mag7 surge as a safe haven, while the storage sector suffers a brutal sell-off

#夏日创作营 US stocks show extreme divergence as inflation cools: Mag7 rushes to safety while the storage sector suffers a brutal selloff

On July 15, the U.S. released June PPI data. The overall reading came in below market expectations, and together with the earlier CPI’s signs of weaker inflation, it offered double confirmation of the trend of sustained easing in U.S. inflation.
After the data was released, market pricing for the probability of the Fed hiking again in September fell below 50%, and short-term rate-hike expectations largely dissipated.
However, on the same day, Fed Governor Wos kept a hawkish tone in testimony to Congress. He said that several inflation indicators still have not reached the agreed-upon range, while only the U.S. labor market remains resilient. At the same time, he argued that the Fed still needs to continue shrinking its balance sheet to leave room for potential future crises with a more accommodative monetary policy, and he made clear that no current inflation data can meet its policy satisfaction standards.
Inflation easing should have weighed on U.S. Treasury yields, but since early July international oil prices have kept rebounding. The market worries that inflation could rise again, which prevented Treasury yields from falling materially and kept them at elevated levels for the year.
As rate-hike expectations cooled, yields declined slightly. The U.S. dollar index also fell by 0.43% on the day, with a single-day drop of 0.43%. On the other side, the U.S. launched another round of military strikes against Iran. The risk of geopolitical conflict in the Middle East has lifted a risk-off premium, offsetting to some extent the macro tailwinds brought by cooling inflation.
With geopolitical risk and macro expectations pulling in opposite directions, market volatility for the U.S. equity benchmark tightened noticeably and the overall trend steadied. But inside the market, capital staged extreme rotation, and a clear pattern of structural divergence emerged: large amounts of money exited the high-level semiconductor track, while crowds moved into Mag7 large-cap tech leaders with defensive attributes, making the winners-and-losers divide stark.
Mag7 became the market’s core safe-haven position, jumping 4.01%. Market rumors said Apple plans to launch localized, low-cost AI models for the 🇨🇳 market. This could both compress production costs and lift earnings expectations, while also avoiding cross-border tech regulatory constraints, substantially boosting investors’ confidence in its AI deployment and global commercialization prospects.
From a macro perspective, weaker inflation, cooled rate-hike expectations, and a weaker dollar form a combined logic that benefits large tech stocks.
Mag7’s overseas revenue exposure is generally high, so a weaker dollar directly boosts overseas FX translation profits. Meanwhile, falling market interest rates significantly relieve valuation discount pressure on growth stocks, opening up room for valuation repair in the sector.
On the capital side, overall U.S. stock trading was subdued. Combined with ongoing geopolitical disruptions in the Middle East, Mag7 core assets with stronger earnings certainty became institutions’ first choice for risk avoidance, helping them sidestep the higher volatility risk in smaller themed names. In sharp contrast to Mag7’s strength, the storage-chip sector—one that had surged earlier—saw intense selling pressure that day and led declines across the entire market. This deep pullback was not a short-term emotional outflow, but rather the result of multiple negative factors concentrating at once: valuation, supply-demand, industry fundamentals, and capital repositioning.
First, the sector’s valuations became bubble-like and trading overcrowding hit the ceiling.
The Philadelphia Semiconductor Index’s cumulative gain this year reached 83%. Funds had previously crowded into the storage track, and the rally had been front-loaded and already overdrawn; valuations then diverged sharply from earnings growth rates, and institutions were strongly inclined to realize gains.
Second, industry profitability expectations were completely reversed.
Disagreements intensified over how storage companies’ cash flows can recover. Manufacturers had previously made large-scale capacity expansions and sustained heavy capital expenditures, but the pace of end-demand recovery lagged expectations. The market questioned whether such large capital spending can translate into stable free cash flow, and industry earnings certainty weakened significantly.
Third, a continuing deterioration in the supply-demand landscape suppressed prices.
The storage industry has been gradually moving into a period of supply loosening. Company inventories are high. The chip price-hike cycle has effectively ended, and expectations of price declines have continued to build. A storage industry leader, CoreWeave, plans to hedge the risk of chip price falls via derivatives, sending a pessimistic outlook from the industry side to the secondary market.
Fourth, structural capital rotation created a squeeze effect.
Main players took profits at high levels in storage, then made a large switch into Mag7 assets with steadier price action, further amplifying selling pressure on the storage sector. With multiple negative factors converging, capital fled the storage sector aggressively: SK Hynix fell by more than 9%, and Micron and SanDisk dropped 8%.
Overall, this deep pullback in the storage sector is the combined result of multiple factors acting together: pessimistic industry expectations, weakening fundamentals, a return toward more reasonable valuations, and large-scale capital repositioning.