AI Hardware Stocks Rebound Strongly, Sustainability Hinges on Apple's Market Cap Retraction

The Philadelphia Semiconductor Index (SOX) is exhibiting a standard technical rebound.

The three circles marked in the chart above sequentially represent:

- Initial test of the rising 54-day moving average (54MA), which naturally provides support. - A second retest of the 54MA within a short period is highly likely to break temporarily, but will trigger a bounce to confirm the shift from support to resistance. - A probe toward the next 100-day moving average (100MA) from the 54MA; as this is the first test, support is inevitable.

From a technical standpoint, the sharply declining 13MA and 27MA could stage a phased recovery.

The VIX remains below 20, indicating limited volatility in non-AI stocks and a stable, range-bound S&P 500.

Beyond the VIX, a single-day heatmap reveals that, over the past period, declines were concentrated solely in AI stocks. Looking at July 30—the day of the strong SOX rebound—the heatmap shows many sector groups actually declined (green). Among S&P 500 constituents, 304 out of 500 stocks fell, meaning more stocks declined than rose. This reflects a recent leveraged valuation correction focused on overbought AI hardware stocks, suggesting a short-term rebound will now concentrate in AI hardware.

Apple's market cap retracement is the most favorable scenario for sustained capital rotation into AI stocks next week.

Unless it's a 90% (up/down) extreme trading day, the broader market maintains a range-bound structure with capital seesawing between sectors. Thus, the sustainability of this deep-rebound in AI hardware stocks depends on whether previously resilient, non-AI stocks—especially Apple—that absorbed capital now release it.

Apple is the ideal 'capital vampire' target for AI hardware stocks. Since July, the SOX has plunged 20.66%, while Apple rose 15.23%. Notably, Apple has been the most passive in AI development. Amid volatility in CSPs aggressively investing in AI, indirect spillover to AI hardware stocks is possible. Therefore, a sharp correction in Apple would be the best scenario for the SOX and Asian equities.

Apple's July 31 earnings are expected to trigger a downward gap, retesting the neckline support marked in the chart. If the closing price breaks below $315, it could encourage momentum investors and July's hedged capital to flow back into AI stocks, providing sustained buying momentum.

(Writer: Fan Zhen-Feng, Analyst, Yung-Cheng Asset Management)

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