The S&P 500 has been holding up around 7,500 as the war in the Middle East escalates. It closed at $7411.98 on Friday, just below its 50-day moving average (chart). Alphabet and Tesla both reported great Q2 revenues on Thursday. Yet both stocks were crushed, down 6.9% and 14.5%, as free cash flow turned negative for both. Investors have decided that AI capital spending is a high, known cost with an unknown ROI.
However, the hyperscalers' negative free cash flow has boosted the positive free cash flow of semiconductor companies. Nevertheless, semiconductor stocks gave back more ground this week. Even so, the iShares Semiconductor ETF (SOXX) closed Friday at $527.01, still 32% above its rising 200-day moving average (chart).
We downgraded the S&P 500 Information Technology sector to market weight on December 7, 2025. We continue our overweight ratings on the Energy, Financials, Health Care, Industrials, Materials, and Utilities sectors (table).
Here's what has gotten our attention recently among some of the sector trades:
