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VGT Slides: Is the AI Spending Boom Cooling Down?
3 Jul
Summary
- VGT ETF slid 5% in a week but is up 21% year-to-date.
- NVIDIA now tops all stocks at $4.7 trillion; MSFT down 23%.
- Hyperscaler capex guidance cut over 10% could pressure NVDA, AVGO.
The Vanguard Information Technology ETF (VGT) recently experienced a 5% decline within a week, raising questions about the longevity of the AI capital expenditure super-cycle. While the fund remains up 21% year-to-date, this correction highlights market uncertainty regarding sustained hyperscaler investment.
Significant divergence exists among VGT's top holdings. NVIDIA has surged to a $4.7 trillion market capitalization, surpassing Apple. In contrast, Microsoft has seen a 23% year-to-date decrease, and Salesforce has lost 40% during the same period.
The primary macroeconomic factor influencing VGT is hyperscaler capital expenditure guidance. A reduction exceeding 10% in forward guidance by any major hyperscaler could directly impact NVIDIA and Broadcom, echoing the sharp downturns seen in the semiconductor sector during the 2000 telecom bust.
