Microsoft, Nvidia, Apple to Amazon - lose $2.3 trillion in June: Is it time to trim your US tech stocks?

The combined market value of the Mag -7 has shrunk by roughly $2.3 trillion in June as investors question whether Big Tech's massive AI spending will deliver meaningful returns.

The Magnificent Seven includes Microsoft, Nvidia, Alphabet, Apple, Meta, Tesla, and Amazon.

CNBC Magnificent 7 Index has declined 10% last month and some major shockers include - Microsoft is down 20% in June, Nvidia has fallen around 13%. Both Apple and Amazon are down by around 8%.

Why tech stock are falling?

“The number is real. The Mag 7 have lost something like $2.3 trillion in June and this is definitely a big drop. But, tech isn't actully falling apart. The main concern is whether the massive investments in AI (nearly $1 trillion) will start generating meaningful return,” Viram Shah, Founder & CEO, Vested Finance.

Another interesting aspect to look is at where the money is moving, adds Sidharth Sogani is CEO of Blue Aster Capital (Bahrain) and CREBACO Global. “Semiconductor and memory companies have outperformed this year, while several of the Magnificent Seven stocks have struggled. That tells me capital isn't leaving AI. It's becoming more selective and rewarding the companies that are seeing the most immediate benefits from the AI buildout.”

Is it time to trim US tech investments?

So when someone asks me 'should I cut now?' I think that's the wrong question. The real question is, 'am I more concentrated than I thought?' – Vested Finance CEO asserts.

Issue is most Indian investors entered the US market betting on these seven names. While their portfolios may appear diversified, they are largely dependent on the same AI theme.

So, if the market swing in June is making you you uncomfortable, it strong indication that your portfolio is too concentrated— “It's not really telling you to stop owning global stocks,” says Shah

What strategy should Indian investors follow?

First, just check how much of your US money is sitting in these mega-caps versus the other 490 companies in the index. If a large portion is invested in just a few companies, consider diversifying through broader market or equal-weight index fund

Second, consider why you had actually invested in US stocks. “India is under 2% of the world's stock market. That's the whole point of going outside — and that hasn't changed because seven stocks had a bad month.”

Third, if you're doing SIPs, this kind of dip is actually working for you. You're buying the big names at a much cheaper price

Another approach that might work is cutting exposure to companies where valuations look stretched, and at same time increasing exposure to businesses building AI infrastructure, suggests Sogani

“Keeping some cash on hand also makes sense. If upcoming earnings show that AI investments are starting to deliver real financial results, this correction may end up looking like a healthy reset and a good buying opportunity, rather than the beginning of a larger downturn.”

What next for tech stocks?

As for valuations, there are valid arguments on both sides.

Some points out, these companies make a huge chunk of the actual profits in the index, plus the AI demand is growing. Hence, this is good oppertunity to buy at a dip. The other side argue – prices are high, a lot of future growth is already baked in, and if the spending doesn't pay off on time, there's room to fall more.

Since both sides are right, it's genuinely hard to call right now. “What you can control isn't the call. It's how concentrated you are, and whether you'll be forced to sell at a bad time,” Shah says

The answer to a scary month is usually not 'get out,' and at the same time, it's not 'go all in' either. The best thing to do right now is – 'rebalance and stay spread out.'