Overnight, the U.S. technology sector experienced a sharp pullback after a brief rally. The three major U.S. stock indices closed mixed, with the Dow Jones Industrial Average up 1.14%, the Nasdaq Composite down 0.8%, and the S&P 500 essentially flat, up just 0.01%.

The storage and semiconductor sectors were hit particularly hard. The Philadelphia Semiconductor Index plunged 5.44%.

Individual stocks saw significant declines: Western Digital dropped over 9%, ARM Holdings fell more than 6%, Micron Technology and Intel both lost over 5%, while Advanced Micro Devices and ASML declined more than 4%.

Over the last two trading sessions, the Philadelphia Semiconductor Index has cumulatively fallen 11%, with both AI chip and storage stocks facing massive sell-offs.

Data from Goldman Sachs indicates that storage stocks have plunged over 18% in two days. The firm's AI-related investment portfolio has tumbled 16% over the same period, marking its worst performance on record.

This has significantly eroded hedge fund year-to-date gains. Their VIP long portfolio has seen its annual return slide to -21%, while the S&P 500 remains up approximately 9% for the year.

Corporate and Political Developments

According to an internal memo, Tesla Motors informed its staff last month that it would cap employee spending on AI tools at $200 per week starting July 6th.

This move sends a clear signal that even companies aggressively implementing AI to transform operations and products are now tightening their belts on related costs. Tesla had previously been actively promoting the use of various AI tools within the company.

Former U.S. President Donald Trump stated he recently spoke with Micron Technology, praising the company and Dell. Regarding Elon Musk, Trump said they have a very good relationship, though Musk was unhappy with his stance on electric vehicle mandates.

On the topic of AI, Trump acknowledged it needs regulatory oversight but believes less control is better. He also mentioned holding a very small amount of NVIDIA stock.

Regarding the Federal Reserve, Trump commented that Chair Jerome Powell has a somewhat hostile committee but is a great person who must do what he must do.

Trader Sentiment Remains Bullish

Data from Citi shows traders are heavily betting on the Nasdaq 100 Index, anticipating the rally will continue. Typically, a 30% gain in the Nasdaq 100 over three months prompts profit-taking, but investors are now wagering the upswing is just beginning.

The rapid growth in demand for call options on the Nasdaq 100 suggests money is rotating into AI and growth stocks. Citi data indicates that, by one measure, the cost of call options on tech stocks relative to the S&P 500 is at its highest level since 2007.

Brent Kochuba, founder of options platform SpotGamma, noted regarding tech stock call options, "Traders are currently in an extremely bullish state."

Is There Still an Entry Point for Tech?

Turning to the Asia-Pacific markets, on July 2nd, the three major A-share indices collectively plummeted, with a simultaneous market style shift. The Shanghai Composite Index fell 2.03%, the Shenzhen Component Index dropped 3.85%, and the ChiNext Index plunged 5.71%.

First-half leading sectors like semiconductor equipment, storage chips, and optical modules led the declines, while coal, textiles & apparel, and retail sectors gained. Japanese and South Korean markets also fell sharply.

Reports suggest the A-share tech stock sell-off stemmed from market interpretation of Meta's plan to sell computing power as signaling a surplus. However, several industry insiders believe this is a misinterpretation, arguing that Meta's move signifies the maturity of the AI infrastructure business model, not the end of AI capital expenditure.

Sheng Yiqing, a stock index researcher at CITIC Futures, believes the recent A-share market is in a high-level consolidation phase. After previous gains, bullish sentiment has cooled. Thursday's pullback reflects a phase of profit-taking following rapid appreciation, not a reversal of the medium-to-long-term trend.

Guolian An Fund analysis noted that since June, over 500 listed companies have issued share price volatility and risk warnings, heavily concentrated in first-half outperformers like semiconductors and optical modules. This concentrated release of announcements directly impacted short-term market sentiment. The core sectors of semiconductors, AI computing, and optical modules have accumulated massive floating profits, leading to a concentrated release of profit-taking demand.

As the mid-year reporting season approaches, market focus is shifting from industry trend narratives to actual earnings delivery. After rapid valuation expansion in the first half, whether the tech sector can gain fundamental support during the earnings window is a key current concern.

Wang Peicheng, a senior macro strategy analyst at Orient Futures, stated that data shows the five major U.S. AI cloud service providers are continuously raising their capital expenditure plans. The latest figures suggest their capex could approach $800 billion by 2026, a roughly 90% year-on-year increase, potentially exceeding $1.1 trillion by 2027, reflecting accelerating AI infrastructure investment.

Domestically, the capital expenditures of Tencent, Baidu, and Alibaba's cloud service units are also expanding rapidly, nearing 200 billion yuan by 2025. Concurrently, token call volume statistics from the OpenRouter platform are climbing at a steep rate.

As the AI technological revolution is still in its initial hardware-constrained phase, the global semiconductor capacity expansion pace lags far behind the growth in computing power demand. The strong industry trend is clearly not over. The A-share tech sector has strong earnings support driven by end-order demand.

Sheng Yiqing believes the overall A-share market will maintain a consolidation pattern, with the growth style still holding higher allocation value relative to the value style.

The current adjustment in the tech and growth sectors is more of a normal pullback within an uptrend; the medium-to-long-term upward trend has not changed. It is advisable to continue focusing on structural investment opportunities brought by the growth style.