Apple Seen as a Safe Haven, but Funds May Flee if Chip Rally Returns

1. Apple seen as a safe haven, but money may rotate out if semiconductors rebound

Apple has drawn attention as the big tech company best positioned to avoid the burden of heavy AI spending, with its market capitalization recently surpassing $5 trillion.

Its strengths include more than 2.2 billion active devices, strong customer loyalty, a growing services business, about $100 billion in annual free cash flow and large-scale share buybacks.

Even so, expectations are already high, making the outlook more important than the results themselves. Rising memory prices could lift costs, possible iPhone price increases may become a burden, and competition in China is intensifying.

Investors have recently rotated out of AI and semiconductor stocks and into Apple. But that money could move out quickly if the benefits of AI investment come back into focus or the semiconductor rally resumes.

2. Amazon earnings spotlight falls on AWS growth and AI spending burden

Amazon will report second-quarter results after the close on July 31. The market expects revenue to exceed $197 billion, with earnings per share also increasing from a year earlier.

The biggest focus is AWS growth. Investors expect AWS revenue to have risen 31% from a year earlier, signaling a renewed acceleration, while some brokerages forecast growth of more than 33%.

That growth is being driven by the AI supercomputer project, Amazon's in-house Trainium AI chips and expanding inference demand from Anthropic.

At the same time, free cash flow is falling as capital expenditures surge for AI data centers and the low-Earth-orbit satellite business.

Investors are watching future spending plans more closely than the quarter itself. Alphabet reported strong earnings earlier, but its shares fell after the company outlined plans to step up AI investment. Amazon may face similar pressure if its investment plans are larger than expected.

3. A dove in hawk's clothing? Warsh revives bond vigilante fears

Kevin Warsh, chair of the Federal Reserve, left interest rates unchanged and stressed that the central bank must reach its 2% inflation target. He did not present a specific tightening path, and markets interpreted that as hawkish rhetoric without matching action.

The US Treasury market reacted immediately. The 30-year Treasury yield climbed to nearly 5.23% intraday, the highest since 2007, while the 10-year yield also rose sharply.

The same pattern has appeared before. After the Fed began cutting rates in late 2024, long-term yields rose by more than 100 basis points instead of falling. They did not come down in 2025 despite additional rate cuts, as investors concluded the Fed was more concerned about slowing growth than inflation and sold Treasuries.

History offers a similar precedent. Former Fed Chair Arthur Burns failed to contain inflation under political pressure in the 1970s, lifting inflation expectations and ultimately forcing Paul Volcker to restore credibility with an aggressive tightening cycle that pushed the policy rate to 20%.

Markets are now concerned that if the Fed fails to prove its resolve through action, inflation expectations could rise again and force a much steeper tightening cycle later.

4. Sell semiconductors, buy ketchup: Wall Street rotates into value stocks

Money on Wall Street is moving more decisively from AI- and semiconductor-led growth stocks into value shares such as consumer staples.

Peter Boockvar, chief investment officer at BFG Wealth Partners, told CNBC that the market is "selling semiconductors and buying ketchup." He identified Kraft Heinz as a leading beneficiary.

Kraft Heinz has risen more than 15% over the past month, outperforming both the S&P 500 and the consumer staples sector.

Investors have been drawn to defensive stocks as fatigue over AI spending builds. Interest in Kraft Heinz has also been supported by the new chief executive officer's brand-rebuilding strategy, valuation appeal and a dividend yield of about 6%.

5. AI and chip shares tumble as market weighs bottoming signs against second Archegos fears

Samsung Electronics reported record semiconductor earnings and announced long-term supply contracts, but the market response was muted. The stock erased all of its gains, while SK Hynix dropped sharply.

Major AI-related stocks including Arm, Micron, Marvell, Lam Research and CoreWeave have also corrected by 20% to more than 50% from their highs. Semiconductor shares were rebounding across the board in New York trading on July 30. Whether that rebound marks a durable bottom or only a temporary bounce will become clear over time.

One view in the market is that the broader weakness in semiconductor stocks reflects hedge funds and institutional investors cutting leveraged positions in advance out of concern over a potential second Archegos. The semiconductor index has fallen nearly 30% in less than a month.

There is also a more constructive interpretation. The sector dropped more than 50% in both 1995 and 1997, but later extended its long-term advance during the internet bubble.

This time, unlike past cycles, the market is facing rising AI demand rather than excess memory inventories. That has prompted some investors to argue that the latest pullback may be part of a technical bottoming process driven by deleveraging.

Park Shin-young, New York correspondent nyusos@hankyung.com