Semiconductor Stocks Surge 83% Year-to-Date, Wall Street Shifts Focus From Magnificent Seven Tech Giants

According to Bloomberg data, semiconductor stocks surged 83% year-to-date in 2026, while the Magnificent Seven tech stocks lagged the S&P 500 by over 10 percentage points in the first half. The Philadelphia Semiconductor Index and iShares Semiconductor ETF (SOXX-US) reached near 85% gains, prompting major Wall Street firms to reassess AI investment allocations.

Morgan Stanley Chief Investment Officer Lisa Shalett flagged semiconductor stocks as "severely overbought" and recommended rebalancing toward large-cap cloud service providers including Alphabet, Amazon, and Microsoft. The Magnificent Seven's valuation premium over the broader S&P 500 has narrowed to just 10%, the lowest in over a decade, with price-to-earnings ratios declining from 32.6x to 23.9x, creating what analysts describe as "cheap with strong growth potential."