The throne is never empty. As soon as chipmakers wobbled, US equities immediately found a new favorite. The Philadelphia Semiconductor Index has plunged by 20% from June highs. The panic was triggered by the release of the Kimi K3 model from China's Moonshot AI, which claims to be the world's largest open-source model. Analysts are already drawing parallels with last year's DeepSeek-driven sell-off. Doubts over the payback of colossal AI spending are hitting precisely those names that helped lift the benchmark to a roughly 9% year-to-date gain.

Semiconductor and hyperscaler index dynamics

The S&P 500 itself feels considerably healthier than its previous favorites. The broad index closed below its 50-day moving average after two weeks of declines, yet the equal-weighted S&P finished at a record high. That signals healthy breadth — the sell-off is not market-wide but concentrated in one overheated segment.

The main beneficiary of the rotation was Apple. The company briefly overtook Nvidia in market value, rising to $4.9 trillion. Investors exiting overheated chip stocks found a new haven — especially after Beijing authorised Apple to roll out Apple Intelligence in China, a move that should accelerate revenue growth.

Retail traders are shifting priorities as well. The long love affair between retail investors and the Magnificent Seven is cooling. Although the group still represents roughly 36% of S&P 500 market cap, investors are increasingly hunting for the "next AI superstar" among less hyped names rather than continuing to add to Microsoft, Apple, Amazon, Meta, Nvidia, Alphabet, and Tesla.

It's not all one-way. The Magnificent Seven are lagging the broader market for the first time in years, which is a rare signal given they have driven the market for much of the recent run. Societe Generale thinks the rotation will likely be short-lived: the bank has raised its year-end S&P 500 target to 8,000, implying roughly a further 6% gain from current levels.

Earnings season will add fuel to the story. Next week, results are due from GM, Alphabet, IBM, Tesla, Intel, and Verizon. Meanwhile, the market's gains are increasingly concentrated: analysts estimate that just 13 issuers will account for half of S&P 500 revenue growth over the next four years. The problem is not necessarily an overvalued index — it's that the index's fate rests on a handful of names.

Bulls remain in control of equities, but they are waiting for a clear signal from corporate profits before pushing the benchmarks to new highs. Will the earnings season justify elevated expectations? Time will tell.

Technically, the daily chart shows that there was an opening gap down and a bar with a long lower wick. A break below its low at 7,430 would be a reason to add to short positions.